-----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, AgSuZYoCKL81uMWyyzxF2Yfoy5zGVAee18uuW7UM8a0zLykz7GUPztcE8z58N9tV s/rrGyxodcXhgaSQDRQzog== 0000950103-98-000714.txt : 19980717 0000950103-98-000714.hdr.sgml : 19980717 ACCESSION NUMBER: 0000950103-98-000714 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980630 ITEM INFORMATION: FILED AS OF DATE: 19980715 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL EXPRESS CORP CENTRAL INDEX KEY: 0000230211 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 710427007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07806 FILM NUMBER: 98666976 BUSINESS ADDRESS: STREET 1: 2005 CORPORATE AVE CITY: MEMPHIS STATE: TN ZIP: 38132 BUSINESS PHONE: 9013693600 MAIL ADDRESS: STREET 1: 2005 CORPORATE AVE CITY: MEMPHIS STATE: TN ZIP: 38132 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 30, 1998 (Date of earliest event reported) ---------- FEDERAL EXPRESS CORPORATION (Exact name of registrant as specified in its charter) Delaware (State of Incorporation) 1-7806 71-0427007 (Commission File Number) (IRS Employer Identification No.) 2005 Corporate Avenue, Memphis, Tennessee 38132 (Address of principal executive offices) Registrant's Telephone Number, including area code: (901) 369-3600 ================================================================================ ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS The following documents are being filed in connection with, and incorporated by reference in, the Registrant's Registration Statement on Form S-3 No. 333-49411, which was declared effective on June 11, 1998. Exhibit Description of Exhibit 1 Underwriting Agreement relating to Federal Express Corporation 1998-1-A Pass Through Trust, 1998-1-B Pass Through Trust and 1998-1-C Pass Through Trust 4.a.1 Pass Through Trust Agreement dated as of May 1, 1997, between Federal Express Corporation and First Security Bank, National Association (the "Pass Through Trustee") (Filed as Exhibit 4.a.3 to Registrant's Form 8-K dated May 12, 1997, Commission File No. 1-7806, and incorporated herein by reference.) 4.a.2 Revised form of Pass Through Certificates (included in Exhibit 4.a.3) 4.a.3 Forms of Series Supplements 1998-1-A, 1998-1-B and 1998-1-C to the Pass Through Trust Agreement between Federal Express Corporation and the Pass Through Trustee relating to the Pass Through Certificates 4.a.4 Form of Intercreditor Agreement among the Pass Through Trustee, Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), and First Security Bank, National Association (the "Subordination Agent") 4.a.5 Forms of Irrevocable Revolving Credit Agreements for Class A and Class B Pass Through Certificates between the Subordination Agent and the Liquidity Provider 4.b.1 Forms of Trust Indenture and Security Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between State Street Bank and Trust Company of Connecticut, National Association (the "Owner Trustee") and First Security Bank, National Association (the "Indenture Trustee") relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) in connection with the offering of Pass Through Certificates 4.b.2 Forms of Equipment Trust Certificates (included in Exhibit 4.b.1) 4.c Forms of Participation Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) among Federal Express Corporation, the applicable Owner Participant, the Original Loan Participants, if any, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Subordination Agent relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.d Forms of Trust Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between the applicable Owner Participant and the Owner Trustee relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.e Forms of Lease Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between the Owner Trustee, as Lessor, and Federal Express Corporation, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.f Form of Ancillary Agreement I (Federal Express Corporation Trust No. N675FE) among the Federal Express Corporation, as Lessee, the applicable Owner Participant, the Indenture Trustee and the Owner Trustee relating to Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE) 4.g Forms of Owner Participant Guaranty (Federal Express Corporation Trust Nos. N590FE and N675FE) in favor of Federal Express Corporation, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N590FE and N675FE) 4.h Forms of Owner Trustee Guaranty (Federal Express Corporation Trust Nos. N590FE and N675FE) in favor of Federal Express Corporation, the applicable Owner Participant, the Indenture Trustee and the Pass Through Trustee, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N590FE and N675FE) Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FEDERAL EXPRESS CORPORATION By: /s/ MICHAEL W. HILLARD ------------------------ Michael W. Hillard Vice President and Controller (principal accounting officer) Dated: June 30, 1998 EXHIBIT INDEX Exhibit Description of Exhibit 1 Underwriting Agreement relating to Federal Express Corporation 1998-1-A Pass Through Trust, 1998-1-B Pass Through Trust and 1998-1-C Pass Through Trust 4.a.1 Pass Through Trust Agreement dated as of May 1, 1997, between Federal Express Corporation and First Security Bank, National Association (the "Pass Through Trustee") (Filed as Exhibit 4.a.3 to Registrant's Form 8-K dated May 12, 1997, Commission File No. 1-7806, and incorporated herein by reference.) 4.a.2 Revised form of Pass Through Certificates (included in Exhibit 4.a.3) 4.a.3 Forms of Series Supplements 1998-1-A, 1998-1-B and 1998-1-C to the Pass Through Trust Agreement between Federal Express Corporation and the Pass Through Trustee relating to the Pass Through Certificates 4.a.4 Form of Intercreditor Agreement among the Pass Through Trustee, Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), and First Security Bank, National Association (the "Subordination Agent") 4.a.5 Forms of Irrevocable Revolving Credit Agreements for Class A and Class B Pass Through Certificates between the Subordination Agent and the Liquidity Provider 4.b.1 Forms of Trust Indenture and Security Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between State Street Bank and Trust Company of Connecticut, National Association (the "Owner Trustee") and First Security Bank, National Association (the "Indenture Trustee") relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) in connection with the offering of Pass Through Certificates 4.b.2 Forms of Equipment Trust Certificates (included in Exhibit 4.b.1) 4.c Forms of Participation Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) among Federal Express Corporation, the applicable Owner Participant, the Original Loan Participants, if any, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Subordination Agent relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.d Forms of Trust Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between the applicable Owner Participant and the Owner Trustee relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.e Forms of Lease Agreements (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) between the Owner Trustee, as Lessor, and Federal Express Corporation, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N585FE, N590FE, N620FE, N621FE, N623FE, N675FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, respectively) 4.f Form of Ancillary Agreement I (Federal Express Corporation Trust No. N675FE) among the Federal Express Corporation, as Lessee, the applicable Owner Participant, the Indenture Trustee and the Owner Trustee relating to Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE) 4.g Forms of Owner Participant Guaranty (Federal Express Corporation Trust Nos. N590FE and N675FE) in favor of Federal Express Corporation, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N590FE and N675FE) 4.h Forms of Owner Trustee Guaranty (Federal Express Corporation Trust Nos. N590FE and N675FE) in favor of Federal Express Corporation, the applicable Owner Participant, the Indenture Trustee and the Pass Through Trustee, relating to Equipment Trust Certificates (Federal Express Corporation Trust Nos. N590FE and N675FE) EX-1 2 EXHIBIT 1 CONFORMED COPY UNDERWRITING AGREEMENT June 30, 1998 between FEDERAL EXPRESS CORPORATION and MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. CITICORP SECURITIES, INC. CREDIT SUISSE FIRST BOSTON CORPORATION J. P. MORGAN SECURITIES INC. Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C TABLE OF CONTENTS Page SECTION 1. Representations and Warranties of the Company............... 6 SECTION 2. Purchase and Sale........................................... 10 SECTION 3. Covenants of the Company.................................... 11 SECTION 4. Payment of Expenses......................................... 13 SECTION 5. Conditions of Underwriters' Obligations..................... 14 SECTION 6. Indemnification............................................. 17 SECTION 7. Contribution................................................ 18 SECTION 8. Representations, Warranties and Agreements to Survive Delivery.................................................... 19 SECTION 9. Termination of Agreement.................................... 19 SECTION 10. Default by One of the Underwriters.......................... 20 SECTION 11. Notices..................................................... 20 SECTION 12. Parties..................................................... 20 SECTION 13. Governing Law............................................... 21 Exhibit A Pricing Information Exhibit B Opinion of Davis Polk & Wardwell Exhibit C-1 Opinion of Davis Polk & Wardwell pursuant to Participation Agreement - Refinancing Exhibit C-2 Opinion of Davis Polk & Wardwell pursuant to Participation Agreement - Prefunding Exhibit D Opinion of the Company Schedule I Underwriters' Commitments Schedule II Terms and Conditions FEDERAL EXPRESS CORPORATION Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C UNDERWRITING AGREEMENT June 30, 1998 MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. CITICORP SECURITIES, INC. CREDIT SUISSE FIRST BOSTON CORPORATION J. P. MORGAN SECURITIES INC. c/o MORGAN STANLEY & CO. INCORPORATED 1585 Broadway New York, New York 10036 Ladies and Gentlemen: Federal Express Corporation, a Delaware corporation (the "Company"), proposes that First Security Bank, National Association, acting not in its individual capacity but solely as pass through trustee (the "Pass Through Trustee") under the Pass Through Trust Agreement dated as of May 1, 1997 (the "Basic Agreement"), as supplemented for each class of pass through certificates (the "Pass Through Certificates") to be purchased hereunder (each, a "Class") by a Series Supplement (each, a "Series Supplement"), in each case between the Company and the Pass Through Trustee (for each Class, the Basic Agreement, as supplemented by the related Series Supplement, being referred to herein as the "Pass Through Agreement"), issue and sell to the underwriters named in Schedule I hereto its Pass Through Certificates in the aggregate amounts and with the applicable interest rates and final expected distribution dates set forth on Exhibit A hereto (the "Offered Certificates") on the terms and conditions stated herein and in Schedule II. Each Class of Pass Through Certificates will represent interests in a separate trust (each, a "Pass Through Trust") established pursuant to the related Pass Through Agreement to fund the purchase of equipment trust certificates (the "Equipment Certificates") which are to be issued as nonrecourse obligations by certain owner trustees, each acting not in its individual capacity but solely as owner trustee (each, an "Owner Trustee"), in connection with separate leveraged lease transactions relating to five McDonnell Douglas MD-11F aircraft and eight Airbus A300F4-605R aircraft (each, an "Aircraft" and, collectively, the "Aircraft"). The proceeds from the sale of the Equipment Certificates will be used to (i) finance a portion of the purchase price to be paid by the Owner Trustee on behalf of eleven Owner Trusts (Trust Nos. N585FE, N620FE, N621FE, N623FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE and N682FE, and (ii) refinance the aggregate outstanding principal amount of the Original Loan Certificates issued by the related Owner Trust in connection with transactions relating to Trust Nos. N675FE and N590FE. Each series of Equipment Certificates will be issued under a separate Trust Indenture and Security Agreement between First Security Bank, National Association, acting not in its individual capacity, but solely as Indenture Trustee (the "Indenture Trustee"), and the related Owner Trustee (each, an "Indenture" and, collectively, the "Indentures"). As used herein, unless the context otherwise requires, the term "Underwriters" shall mean the firm or firms named as Underwriter or Underwriters in Schedule I and the term "you" shall mean the Underwriter or Underwriters, if no underwriting syndicate is purchasing the Offered Certificates, or the representative or representatives of the Underwriters, if an underwriting syndicate is purchasing the Offered Certificates, as indicated in Schedule I. Payments of interest on the Class A and Class B Pass Through Certificates to be issued by the related Pass Through Trust will be entitled to the benefits of a separate liquidity facility for each such Pass Through Trust, Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), will enter into a separate revolving credit agreement (a "Liquidity Facility") to be dated as of June 15, 1998, for the benefit of the holders of the Class A and Class B Certificates issued by the related Pass Through Trust. The Liquidity Provider and the holders of the Offered Certificates will be entitled to the benefits of an Intercreditor Agreement to be dated as of June 15, 1998 (the "Intercreditor Agreement") among each Pass Through Trust, First Security Bank, National Association, as Subordination Agent (the "Subordination Agent"), and the Liquidity Provider. The Company has filed with the Securities and Exchange Commission (the "Commission") two registration statements on Form S-3 (Nos. 333-07691 and 333-49411) for the registration of certain equipment trust certificates, pass through certificates and other securities, including the Offered Certificates, under the Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"). Such registration statements have been declared effective by the Commission and the Basic Agreement has been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). The Company has, pursuant to Rule 424 under the 1933 Act, filed with, or transmitted for filing to, or shall within the required period of time hereafter file with or transmit for filing to, the Commission a combined prospectus supplement (the "Prospectus Supplement") specifically relating to the Offered Certificates, together with a combined basis prospectus relating to pass through certificates covered by the above-referenced registration statements, in each case, in accordance with Rule 429 of the 1933 Act Regulations. The term "Registration Statement" refers to each such registration statement in the form in which it became effective, including the exhibits thereto and the documents incorporated by reference therein, as amended to the date hereof. The term "Basic Prospectus" means the above-referenced combined basis prospectus relating to pass through certificates. The term "Prospectus" means the Basic Prospectus supplemented by the Prospectus Supplement. The term "Preliminary Prospectus" means a preliminary combined prospectus supplement specifically relating to the Offered Certificates together with the Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus" and "Preliminary Prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement" and "amendment" or "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that have been filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"). If the Company has filed an abbreviated registration statement to register additional equipment trust certificates or pass through certificates pursuant to Rule 462(b) under the 1933 Act, then any reference herein to the term "Registration Statement" shall include such Rule 462(b) registration statement. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings specified in or pursuant to the Pass Through Agreement or the Indenture relating to each related series of Equipment Certificates. SECTION 1. Representations and Warranties of the Company. (a) The Company represents and warrants to you and to each Underwriter named in Schedule I, as of the date hereof, as follows: (i) Due Incorporation and Qualification. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Title 49 of the United States Code, as amended (the "Transportation Code"), holding an air operating certificate issued by the Secretary of Transportation pursuant to Chapter 447 of the Transportation Code for aircraft capable of carrying 10 or more individuals or 6,000 or more pounds of cargo, has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; and is duly qualified to do business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise. (ii) Subsidiaries. Each subsidiary of the Company which is a significant subsidiary as defined in Rule 405 of Regulation C of the 1933 Act Regulations (each a "Significant Subsidiary") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise; and all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, except for directors' qualifying shares (except as otherwise stated in the Registration Statements), is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (iii) Registration Statements and Prospectus. At the time each Registration Statement became effective, such Registration Statement complied, and as of the date hereof does comply, in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission promulgated thereunder. Each Registration Statement, at the time it became effective, did not, and at each time thereafter at which any amendment to the Registration Statement becomes effective, will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as of the date hereof, does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from either Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by an Underwriter expressly for use in the either Registration Statement or Prospectus or to those parts of the Registration Statement which constitute Statements of Eligibility and Qualification of Trustees (Form T-1) under the 1939 Act. No stop order suspending the effectiveness of either Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (iv) Incorporated Documents. The documents incorporated by reference in the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations promulgated thereunder (the "1934 Act Regulations"), and, when read together and with the other information in the Prospectus, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were or are made, not misleading. (v) Accountants. The accountants who certified the financial statements included or incorporated by reference in the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (vi) Financial Statements. The financial statements of the Company included or incorporated by reference in the Prospectus and the Registration Statements present fairly the financial position of the Company as of the dates thereof and the results of operations, changes in common stockholders' investment and cash flows of the Company, for the respective periods covered thereby, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved; and the financial schedules included or incorporated by reference in the Registration Statements meet the requirements of the 1933 Act Regulations or the 1934 Act Regulations, as applicable. (vii) Material Changes or Material Transactions. Except as stated in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statements and the Prospectus, the Company has not incurred any liabilities or obligations, direct or contingent, or entered into any transactions which are material to the Company, and there has not been any material adverse change in the capital stock or short-term debt, or any material increase in long-term debt of the Company, or any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or other), business, prospects, net worth or results of operations of the Company. (viii) No Defaults; Regulatory Approvals. Neither the Company nor any of its subsidiaries is in violation of its charter or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or any of them or their properties may be bound. The execution and delivery of this Agreement, each Pass Through Agreement and the other Operative Agreements to which the Company is or is to be a party and the consummation of the transactions contemplated herein and therein have been duly authorized by all necessary corporate action and duly executed and delivered by the Company and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien (other than as permitted under the Leases), charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company or any such subsidiary is a party or by which it or any of them may be bound or to which any of the property or assets of the Company or any such subsidiary is subject, which conflict, breach or default would have, individually or in the aggregate with any other such instances, a material adverse effect on the condition (financial or other), business, prospects, net worth or results of operations of the Company and its subsidiaries considered as one entity, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any law, administrative regulation or administrative or court order or decree currently in effect or in effect at the time of execution and delivery of this Agreement, each Pass Through Agreement and the other Operative Agreements and applicable to the Company or any of its subsidiaries. No consent, approval, authorization, order or decree of any court or governmental agency or body is required for the consummation by the Company of the transactions contemplated by this Agreement, any Pass Through Agreement or any other Operative Agreement to which the Company is or is to be a party, except such as may be required under the 1933 Act, the 1939 Act, the 1933 Act Regulations or state securities or Blue Sky laws, the Transportation Code, and the Uniform Commercial Code as in effect in Delaware and Tennessee. (ix) Legal Proceedings. Except for matters described in the Prospectus (as to which the Company can express no opinion at this time concerning the Company's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of the Company), there is no pending, or to the best knowledge of any financial officer of the Company, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on the financial condition of the Company or the ability of the Company to perform its obligations under the Pass Through Agreements and the other Operative Agreements to which the Company is a party. (x) Compliance with Laws. The Company's business and operations comply in all material respects with all laws and regulations applicable thereto and there are no known, proposed or threatened changes in any laws or regulations which would have a material adverse effect on the Company or the manner in which it conducts its business. The Company possesses all valid and effective certificates, licenses and permits required to conduct its business as now conducted, except for instances which individually or in the aggregate do not, or will not, have a material adverse effect on the condition (financial or other), business, prospects or results of operations of the Company. (xi) Enforceability of Operative Agreements. Each of the Pass Through Agreements and the other Operative Agreements to which the Company is or is to be a party have been duly authorized by the Company, will each be substantially in the form heretofore supplied to you and, when duly executed and delivered by the Company and the other parties thereto, will each constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Basic Agreement as executed is substantially in the form filed as an exhibit to the Registration Statements and has been duly qualified under the 1939 Act. (xii) Validity of the Offered Certificates. When executed, issued, authenticated and delivered pursuant to the provisions of the applicable Pass Through Agreement and sold and paid for as provided in this Agreement, each Class of Offered Certificates will constitute valid and legally binding obligations of the Pass Through Trustee enforceable in accordance with their terms; and the Certificateholders of such Offered Certificates will be entitled to the benefits provided by such Pass Through Agreement. (xiii) Validity of the Equipment Certificates. The Equipment Certificates to be issued under each applicable Indenture, when duly executed and delivered by the related Owner Trustee and duly authenticated by the Indenture Trustee in accordance with the terms of such Indenture, will be duly issued under such Indenture and will constitute the valid and binding obligations of such Owner Trustee, and the Holders thereof will be entitled to the benefits of such Indenture. The representations and warranties made by the Company as to the enforceability of the Pass Through Agreements, the Indentures, the Offered Certificates, the Equipment Certificates and the other Operative Agreements set forth in subparagraphs (xi), (xii) and (xiii) above are limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting enforcement of creditors' rights or by general equity principles, and the enforceability of any Pass Through Agreement, Lease and Indenture is also limited by applicable laws which may affect the remedies provided therein but which do not affect the validity of such Pass Through Agreement, Lease or Indenture or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. (b) Additional Certifications. Any certificate signed by any officer of the Company and delivered to you or your counsel in connection with an offering of the Offered Certificates shall be deemed a representation and warranty by the Company to each Underwriter participating in such offering as to the matters covered thereby on the date of such certificate unless subsequently amended or supplemented subsequent thereto. SECTION 2. Purchase and Sale. (a) Subject to the terms and conditions set forth herein and in Schedule II, if any, the Company agrees to cause the Pass Through Trustee to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Pass Through Trustee, at the purchase price specified in Exhibit A hereto, the respective amounts of each Class of Offered Certificates set forth opposite the name of such Underwriter in Schedule I. It is understood that you propose to offer the Offered Certificates for sale to the public as set forth in the Prospectus. (b) Payment of the purchase price for any Offered Certificates to be purchased by the Underwriters shall be made at either the Company's offices in Memphis, Tennessee or the office of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, or at such other place as shall be agreed upon by you and the Company, at 9:00 A.M., New York City time, on the third business day (unless postponed in accordance with the provisions of Section 10) following the date hereof or at such other date, time or location specified in Schedule II, or as otherwise shall be agreed upon by you and the Company (such time and date being referred to as a "Closing Time"). Delivery of the Offered Certificates shall be made for your account as specified in Schedule II against payment by you of the purchase price thereof to, or upon the order of, the Pass Through Trustee (or such other person as the Company may direct) by wire transfer of immediately available funds. Unless otherwise indicated on Schedule II, such Offered Certificates shall be registered in the name of Cede & Co., as nominee for The Depository Trust Company, and in such denominations, as you may request in writing at least two business days prior to the Closing Time. Such Offered Certificates, which may be in temporary form, will be made available for examination and packaging by you in New York, New York, on or before the first business day prior to the Closing Time or at such other time and place specified in Schedule II. (c) As compensation to you for your commitments and obligations hereunder in respect of the Offered Certificates, including your undertakings to distribute Offered Certificates, the Company will pay (or cause to be paid) to you an amount equal to that percentage of the aggregate amount of each class of Offered Certificates purchased by you as set forth in Exhibit A as the underwriting discounts and commissions. Such payment shall be made simultaneously with the payment by you to the Pass Through Trustee of the purchase price of the Offered Certificates as specified in Section 2(b) hereof. Payment of such compensation shall be made by wire transfer of immediately available funds. SECTION 3. Covenants of the Company. The Company covenants with each of you, and with each Underwriter participating in the offering as follows: (a) Prospectus Supplement. The Company has prepared a Preliminary Prospectus, and immediately following the execution of this Agreement, the Company will prepare a Prospectus Supplement in connection with the offering of the Offered Certificates. The Company will promptly transmit copies of the Prospectus Supplement to the Commission for filing pursuant to Rule 424 of the 1933 Act Regulations. (b) Notice of Certain Events. The Company will notify you promptly (i) of the effectiveness of any amendment to either Registration Statement, (ii) of the transmittal to the Commission for filing of any supplement to the Prospectus or any document to be filed pursuant to the 1934 Act which will be incorporated by reference in the Prospectus, (iii) of the receipt of any comments from the Commission with respect to either Registration Statement, the Prospectus or the Prospectus Supplement relating in any way to the offer and sale of the Offered Certificates, (iv) of any request by the Commission for any amendment to either Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (v) of the issuance by the Commission of any stop order suspending the effectiveness of either Registration Statement or the initiation of any proceedings for that purpose. (c) Notice of Certain Proposed Filings. The Company will give you notice of its intention to file or prepare any amendment to either Registration Statement or any amendment or supplement to the Prospectus, whether by the filing of documents pursuant to the 1934 Act, the 1933 Act or otherwise, and will furnish you with copies of any such amendment or supplement or other documents proposed to be filed or prepared a reasonable time in advance of such proposed filing or preparation, as the case may be. (d) Copies of the Registration Statements and the Prospectus. The Company will deliver to you as many signed and conformed copies of the Registration Statements (as originally filed) and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated by reference in the Prospectus) as you may reasonably request. The Company will furnish to you as many copies of the Prospectus (as amended or supplemented) as you shall reasonably request so long as you are required to deliver a Prospectus in connection with sales or solicitations of offers to purchase the Offered Certificates. (e) Revisions of Prospectus -- Material Changes. If at any time when the Prospectus is required by the 1933 Act to be delivered in connection with sales of the Offered Certificates any event shall occur or condition exist as a result of which it is necessary, in the reasonable opinion of counsel for the Company, to further amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the reasonable opinion of such counsel, at any such time to amend or supplement the Registration Statements or the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations the Company will promptly prepare and, subject to Section 3(c) hereof, file with the Commission such amendment or supplement, whether by filing documents pursuant to the 1934 Act, the 1933 Act or otherwise, as may be necessary to correct such untrue statement or omission or to make the Registration Statements and Prospectus comply with such requirements. (f) Earnings Statements. The Company will make generally available to its security holders as soon as practicable after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the 1933 Act) covering each twelve-month period beginning, in each case, not later than the first day of the Company's fiscal quarter next following the "effective date" (as defined in such Rule 158) of the Registration Statement (No. 333-49411) with respect to each sale of Offered Certificates. (g) Blue Sky Qualifications. The Company will endeavor, in cooperation with you, to qualify the Offered Certificates for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Underwriters may designate, and will maintain such qualifications in effect for so long as may be required for the distribution of the Offered Certificates; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or to subject itself to taxation as doing business in any jurisdiction in which it is not otherwise required to be so qualified. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Offered Certificates have been qualified as provided above. (h) 1934 Act Filings. The Company, during the period when the Prospectus is required to be delivered under the 1933 Act, will file promptly all documents required to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act. (i) Stand-Off Agreement. The Company will not, between the date of this Agreement and the Closing Time, offer or sell, or enter into any agreement to sell, any equipment notes, pass through certificates, equipment trust certificates or equipment purchase certificates secured by aircraft owned or leased by the Company (or rights relating thereto) unless the Company has provided the Underwriters at least two business days' notice thereof. SECTION 4. Payment of Expenses. The Company will pay (or cause to be paid) all expenses incident to the performance of its obligations under this Agreement, including: (i) the preparation and filing of the Registration Statements and all amendments thereto, the Preliminary Prospectus, if any, and the Prospectus and any amendments or supplements thereto; (ii) the filing of this Agreement; (iii) the preparation, issuance and delivery of the Offered Certificates; (iv) the reasonable fees and disbursements of the Company's accountants and counsel, of the Pass Through Trustee, the Subordination Agent, each Liquidity Provider, the related Owner Trustees and the Indenture Trustee and their respective counsel, and of any registrar, paying agent and authenticating agent; (v) the qualification of the Offered Certificates under securities laws in accordance with the provisions of Section 3(g), including filing fees and the reasonable fees and disbursements of counsel to the Underwriters in connection therewith and in connection with the preparation of any Blue Sky Survey and any Legal Investment Survey; (vi) the printing and delivery to the Underwriters in quantities as hereinabove stated of copies of the Registration Statements and any amendments thereto, and of the Prospectus and any amendments or supplements thereto, and the delivery by the Underwriters of the Prospectus and any amendments or supplements thereto in connection with solicitations or confirmations of sales of the Offered Certificates; (vii) the preparation and delivery to the Underwriters of copies of the Pass Through Agreements and the other Operative Agreements, including all expenses incident to the performance of the Company's obligations under the Pass Through Agreements, Participation Agreements, Indentures, Leases and each of the other agreements and instruments referred to in the Indentures and Participation Agreements; (viii) any fees charged by rating agencies for the rating of the Offered Certificates; and (ix) all fees and disbursements of your counsel, as heretofore agreed. If this Agreement is terminated by you in accordance with the provisions of Section 5 or clause (i) of Section 9 hereof, the Company shall reimburse upon demand the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters that shall have been incurred by you in connection with the proposed purchase and sale of the Offered Certificates. SECTION 5. Conditions of Underwriters' Obligations. The several obligations of the Underwriters to purchase the Offered Certificates pursuant to this Agreement will be subject at all times to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of the Company's officers made in any certificate furnished pursuant to the provisions hereof, to the performance and observance by the Company of all covenants and agreements contained herein, or in Schedule II hereto, on its part to be performed and observed and to the following additional conditions precedent: (a) Stop Order; Ratings Change; etc. At the Closing Time, (i) no stop order suspending the effectiveness of either Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, (ii) the rating assigned as of the date of this Agreement by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g) under the 1933 Act Regulations, to any debt securities of the Company (including for purposes of this Section 5(a)(ii) any rating indicated by the Company as of the date of this Agreement as the rating orally confirmed to the Company by any such rating organization as the rating to be assigned to the Offered Certificates) shall not have been lowered since the execution of this Agreement nor shall any such rating organization have publicly announced that it has placed any debt securities of the Company on what is commonly termed a "watch list" for possible downgrading, and (iii) there shall not have come to your attention any facts that would cause you to believe that the Prospectus, including the Prospectus Supplement, at the time it was required to be delivered to a purchaser of the Offered Certificates, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at such time, not misleading. (b) Legal Opinions. At the Closing Time, you shall have received the following documents: (1) Opinion of Special Counsel to the Company. The opinion of Davis Polk & Wardwell, special counsel to the Company, dated as of such date, in form and substance satisfactory to you, to the effect set forth in Exhibit B and the opinions of such counsel required to be delivered pursuant to each Participation Agreement, dated as of such date, in form and substance satisfactory to you, to the effect set forth in Exhibits C-1 and C-2. (2) Opinion of Company Counsel. The opinion of the Senior Vice President, General Counsel of the Company or any Vice President in the Legal and Regulatory Division of the Company, dated as of such date, in form and substance reasonably satisfactory to you, to the effect as set forth in Exhibit D. (3) Opinion of Counsel to the Underwriters. The opinion of Shearman & Sterling, counsel to the Underwriters, with respect to such matters as you may reasonably request. (c) Officer's Certificate. At the Closing Time, there shall not have been, since the respective dates as of which information is given in the Registration Statements and the Prospectus, any material adverse change in the condition (financial or otherwise) of the Company, or in the earnings or business affairs of the Company; and you shall have received a certificate of any Vice President of the Company, dated as of the Closing Time, to the effect (i) that there has been no such material adverse change, (ii) that the other representations and warranties of the Company contained in Section 1 are true and correct with the same force and effect as though expressly made at and as of the date of such certificate, except to the extent that such representations and warranties expressly relate to an earlier date or later date (in which case such representations and warranties are true and correct on and as of such earlier date or will be true and correct on and as of such later date, as the case may be), (iii) that the Company has made or caused to be made any required filing of the Prospectus pursuant to Rule 424(b) in the manner and within the time period required by Rule 424(b), and (iv) that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the date of such certificate. The officer signing and delivering this certificate may rely upon the best of his or her knowledge as to proceedings threatened. (d) Comfort Letter. At the time of the execution of this Agreement and at the Closing Time, you shall have received a letter from Arthur Andersen LLP or their successors as the Company's independent accountants (the "Independent Accountants"), dated as of the date hereof and of the Closing Time, as the case may be, in form and substance satisfactory to you to the effect that: (i) they are independent public accountants within the meaning of the 1933 Act and the 1933 Act Regulations; (ii) in their opinion the Company's financial statements and schedules included or incorporated by reference in the Registration Statements and Prospectus and covered by their reports included or incorporated therein comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations or the 1934 Act and the 1934 Act Regulations, as the case may be; (iii) they have conducted reviews of the unaudited interim consolidated financial information of the Company included in the Company's Quarterly Reports on Form 10-Q incorporated in the Registration Statements and Prospectus in compliance with the standards for such reviews promulgated by the American Institute of Certified Public Accountants; (iv) on the basis of a reading of the financial statements and schedules of the Company included or incorporated in the Prospectus and the Registration Statements, and the latest available unaudited interim financial statements of the Company, inquiries of officials of the Company responsible for financial and accounting matters, and other specified procedures and inquiries, nothing has come to their attention that caused them to believe that: (A) the unaudited financial statements of the Company included or incorporated in the Prospectus and the Registration Statements do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations or the 1934 Act and the 1934 Act Regulations thereunder, as the case may be, or that such unaudited financial statements are not presented fairly in conformity with generally accepted accounting principles; (B) with respect to the period subsequent to the date of the most recent financial statements incorporated in the Registration Statements and the Prospectus, as of a specified date not more than five business days prior to the date of delivery of such letter, there has been any change in the common or preferred stock or long-term debt of the Company or, as of such date, there has been any decrease in assets or common stockholders' investment, in each case as compared with amounts shown in the most recent consolidated balance sheet of the Company included or incorporated in the Registration Statements and the Prospectus, except in each case for changes or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; or (C) for the period from the date of the most recent financial statements incorporated in the Registration Statements and the Prospectus to such specified date, there was any decrease in operating revenues, operating income, income before taxes or net income of the Company in each case as compared with the comparable period of the preceding year, except in each case for decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (v) in addition to their audit referred to in their reports included or incorporated by reference in the Registration Statements and the Prospectus and the reviews, inquiries and procedures referred to in clauses (iii) and (iv) above, such letter shall state that Arthur Andersen LLP has performed other specified procedures, with respect to certain numerical data and information included or incorporated in the Registration Statements and the Prospectus, as are requested by an Underwriter and specified in such letter and have found such data and information to be in agreement with the accounting records of or analyses prepared by the Company. (e) Satisfaction of Conditions Precedent in Participation Agreements. At the Closing Time, all conditions precedent specified in each Participation Agreement with respect to the refunding or funding of the related Equipment Certificates, as the case may be, shall have been satisfied; the representations and warranties of the Company, the Owner Trustee, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee contained in each of the Participation Agreements shall be accurate as of the Closing Time (except to the extent that they relate solely to an earlier date in which case they shall be accurate as of such earlier date) and you shall have received certificates of the Company and appropriate officers of the respective Owner Trustees, Pass Through Trustees and Indenture Trustees, dated as of the Closing Time, to such effect; and you shall have received a copy of each opinion required to be delivered under each of the Participation Agreements dated as of the Closing Time, and addressed to you, and of such other documents furnished in connection with the fulfillment of such conditions as you may reasonably request. (f) Other Documents. At the Closing Time, counsel for the Underwriters shall have been furnished with such documents and opinions as such counsel may reasonably require for the purpose of enabling such counsel to pass upon the issuance and sale of Offered Certificates as herein contemplated and related proceedings, or in order to evidence the accuracy and completeness of any of the representations and warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of Offered Certificates as herein contemplated shall be satisfactory in form and substance to you. SECTION 6. Indemnification. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, arising out of any untrue statement of a material fact contained in the Registration Statements (or any amendment thereto), or the omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto) or the omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever arising out of or based upon any such untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever arising out of or based upon any such untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter expressly for use in either Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or made in reliance upon the Statements of Eligibility and Qualification of Trustees (Form T-1) under the 1939 Act filed as exhibits to the Registration Statements; and provided, further, that the foregoing indemnity agreement, with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Offered Certificates, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter 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 to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities. (b) Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions made in either Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriters through you expressly for use in such Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. SECTION 7. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 6 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company and the Underwriters of the offering of Offered Certificates shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and one or more of the Underwriters in respect of such offering, as incurred, in such proportions that each Underwriter is responsible, severally and not jointly, for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus in respect of such offering bears to the initial public offering price appearing thereon and the Company is responsible for the balance; provided, however, that 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. For purposes of this Section, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed a Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as the Company. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive each delivery of and payment for any of the Offered Certificates. SECTION 9. Termination of Agreement. You may terminate this Agreement, immediately upon notice to the Company, at any time prior to the Closing Time (i) if there has been, since the date hereof or since the respective dates as of which information is given in either Registration Statement, any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company, or (ii) if there shall have occurred any material adverse change in the financial markets in the United States or any outbreak or escalation of hostilities or other national or international calamity or crisis, the effect of which shall be such as to make it, in your judgment, impracticable to market the Offered Certificates or enforce contracts for the sale of the Offered Certificates, or (iii) if trading in any securities of the Company shall have been suspended by the Commission or a national securities exchange, or if trading generally on any of the American Stock Exchange, the New York Stock Exchange or the Nasdaq National Market shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, by either of said exchanges or by order of the Commission or any other governmental authority, or if a banking moratorium shall have been declared by either federal or New York authorities. In the event of any termination of this Agreement, the covenant set forth in Section 3(f) hereof, the provisions of Section 4 hereof, the indemnity and contribution agreements set forth in Sections 6 and 7 hereof, and the provisions of Sections 8 and 13 hereof shall remain in effect. SECTION 10. Default by One of the Underwriters. If any Underwriter shall fail at the Closing Time to purchase the Offered Certificates which it is obligated to purchase hereunder (the "Defaulted Certificates"), and the aggregate amount of Defaulted Certificates is not more than one-tenth of the aggregate amount of the Offered Certificates to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the amount of the Offered Certificates set forth opposite their respective names in Schedule I hereto bears to the aggregate amount of Offered Certificates set forth opposite the names of all such non-defaulting underwriters to purchase the Defaulted Certificates; provided that in no event shall the amount of Defaulted Certificates that any Underwriter has agreed to purchase pursuant to this Agreement be increased by an amount in excess of one-ninth of such amount of Offered Certificates without the written consent of such Underwriter. If the aggregate amount of Defaulted Certificates is more than one-tenth of the aggregate amount of the Offered Certificates to be purchased on the Closing Date, and arrangements satisfactory to the Underwriters and the Company for the purchase of such Defaulted Certificates are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriters or the Company. No action taken pursuant to this Section shall relieve a defaulting Underwriter from liability in respect of its default under this Agreement. In the event of any such default which does not result in a termination of this Agreement, either the non-defaulting Underwriters or the Company shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statements or Prospectus or in any other documents or arrangements. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed, delivered by Federal Express service or transmitted by any facsimile communication. Notices to the Underwriters shall be directed, on behalf of all of the Underwriters, to Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention: Equipment Finance Group, with copies thereof directed to Joel S. Klaperman, Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022. Notices to the Company shall be directed to it at 2007 Corporate Avenue, Memphis, Tennessee 38132 (if by Federal Express service) or P.O. Box 727, Memphis, Tennessee 38194 (if by mail), Attention: Vice President and Treasurer, with copies thereof directed to the Legal Department of the Company at 1980 Nonconnah Drive, Memphis, Tennessee 38132 (if by Federal Express Service) or P.O. Box 727, Memphis, Tennessee 38194 (if by mail), Attention: Managing Director -- Securities and Corporate Law. SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding upon you and the Company and any Underwriter who becomes a party hereto and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto, their respective successors and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Offered Certificates from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 13. Governing Law. This Agreement and the rights and obligations of the parties created hereby and thereby shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in such state. Any suit, action or proceeding brought by the Company against an Underwriter in connection with or arising under this Agreement shall be brought solely in the state or federal court of appropriate jurisdiction located in the Borough of Manhattan, The City of New York. * * * If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between you and the Company in accordance with its terms. Very truly yours, FEDERAL EXPRESS CORPORATION By: /s/ Robert D. Henning ---------------------------------- Name: Robert D. Henning Title: Vice President and Treasurer CONFIRMED AND ACCEPTED, as of the date first above written: MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. CITICORP SECURITIES, INC. CREDIT SUISSE FIRST BOSTON CORPORATION J. P. MORGAN SECURITIES INC. By: MORGAN STANLEY & CO. INCORPORATED By: /s/ Morgan Stanley & Co. Incorporated --------------------------------------- Acting on behalf of themselves and the other named Underwriters Exhibit A FEDERAL EXPRESS CORPORATION Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C
Aggregate 1998 Pass Underwriting Through Final Discounts Certificates Purchase Interest Expected Principal and Designation Price Rate Distribution Date Amount Commissions - ------------------ ---------- ---------- ------------------- -------------- -------------- 1998-1-A 100% 6.720% January 15, 2022 $458,077,000 $2,977,501 1998-1-B 100% 6.845% January 15, 2019 $178,606,000 $1,160,939 1998-1-C 100% 7.020% January 15,2016 $196,795,000 $1,279,168 ------------ ----------- TOTAL $833,478,000 $5,417,607 ============ ===========
Exhibit B Opinion of Davis Polk & Wardwell, Special Counsel for the Company ------------------------------- The opinion of Davis Polk & Wardwell, special counsel for the Company, to be delivered pursuant to Section 5(b)(1) of the Underwriting Agreement shall be to the effect that: 1. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 2. The Registration Statements have become effective under the 1933 Act and the Basic Agreement has been duly qualified under the 1939 Act. 3. None of the Pass Through Trusts is required to be registered under the Investment Company Act of 1940, as amended. 4. The Pass Through Trusts will not themselves be subject to federal income tax. With respect to all other matters addressed in the Basic Prospectus under the caption "Federal Income Tax Consequences," we are also of the opinions ascribed to us therein. We have considered the matters required to be included in the Registration Statements and the Prospectus and the information contained therein. In our opinion (i) the statements in the Basic Prospectus under the captions "Description of the Pass Through Certificates" and "Description of the Equipment Certificates" and in the Prospectus Supplement under the captions "Description of the Pass Through Certificates", "Description of the Equipment Trust Certificates", "Description of the Liquidity Facilities", "Description of the Intercreditor Agreement" and "ERISA Considerations" insofar as such statements constitute a summary of the Pass Through Agreement, the Leases, the Liquidity Facilities, the Intercreditor Agreement, the Participation Agreements and the Indentures, fairly present the information called for by the 1933 Act and the rules and regulations under the 1933 Act (the "1933 Act Regulations") with respect thereto and fairly summarize the material provisions thereof and (ii) the statements in the Basic Prospectus in the sixth and seventh paragraphs under the caption "Description of the Equipment Certificates--Security" and in the Prospectus Supplement in the ninth and tenth paragraphs under the caption "Description of the Equipment Trust Certificates--Remedies," insofar as such statements constitute a description of Section 1110 of the Bankruptcy Code as such Section would be applicable to the Equipment Certificates, fairly summarize the material provisions of such Section as such Section would be applicable to the Equipment Certificates. The Pass Through Certificates conform in all material respects to the summary descriptions thereof contained in the Prospectus. We have not ourselves checked the accuracy or completeness of, or otherwise verified, the information furnished with respect to other matters in the Registration Statements or the Prospectus. We have generally reviewed and discussed with certain officers and employees of the Company, its independent public accountants and your representatives and counsel the information furnished, whether or not subject to our check and verification. On the basis of such consideration, review and discussion, but without independent check or verification, except as stated, (i) we are of the opinion that the Registration Statements and the Prospectus (except for the financial statements and other financial information set forth or incorporated by reference therein, as to which we are not called upon to express any opinion) comply as to form in all material respects with the 1933 Act and the applicable 1933 Act Regulations and (ii) we have no reason to believe that the Registration Statements and the Prospectus included therein (except for the financial statements and other financial information set forth or incorporated by reference therein and the Statement of Eligibility and Qualification (Form T-1) under the 1939 Act of First Security Bank, National Association, as to all of which we are not called upon to express a belief) at the time the Registration Statements became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that, at the time the Prospectus was first filed with the Commission and as of the Closing Time, either of the Registration Statements or the Prospectus (except for the financial statements and other financial information set forth or incorporated by reference therein, as to which we are not called upon to express a belief), contained or contains, as the case may be, an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The foregoing opinions are subject to the following qualifications: (a) We are members of the Bar of the State of New York and the foregoing opinions are limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. (b) We express no opinion as to the scope, effect or other matters arising under the Transportation Code, or the rules and regulations thereunder or as to matters involving filing and recording with the Federal Aviation Administration. (c) This opinion is issued solely to you in connection with the above matter and may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Exhibit C-1 [Letterhead of Davis Polk & Wardwell] July 7, 1998 To each of the Parties named on the Schedule hereto Re: Federal Express Corporation Trust No. [N590FE] [N675FE] ------------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. [N590FE] [N675FE]), dated as of [May 1, 1998][June 1, 1998], as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee, [BMO Leasing (U.S.), Inc.] [PMCC Leasing Corporation], as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and as Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(l)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. Pursuant to the Original Participation Agreement, the Owner Participant and the Original Loan Participant participated in the payment of the Purchase Price of one [McDonnell Douglas MD-11F] [Airbus A 300 F4-605R] Aircraft which was purchased by the Owner Trustee pursuant to the [Bills of Sale] [AVSA's FAA Bill of Sale and AVSA's Warranty Bill of Sale], subjected to the Lien of the Original Indenture and leased to Federal Express under the Original Lease. The Participation Agreement provides, among other things, for the refinancing of the Original Loan Certificates using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. The Lease creates a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the Lease (with the Indenture attached as an exhibit), (B) the Indenture and (C) the Trust Agreement. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) that the Original Loan Certificate is delivered by the Original Loan Participant to the Indenture Trustee for cancellation and is canceled, (vi) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vii) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Original Indenture created, and the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that they purport to create; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Participation Agreement, the Trust Agreement, the Indenture and the Lease by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statements referred to in Section 4.01(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. (e) We rendered an opinion dated [May 27, 1998] [June 18, 1998] (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Two International Place 4th Floor Boston, Massachusetts 02110 Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Original Indenture Trustee - -------------------------- First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York 60 Wall Street 22(nd) Floor New York, New York 10260 Owner Participant - ----------------- [BMO Leasing (U.S.), Inc. c/o Bank of Montreal 115 South LaSalle Street Chicago, Illinois 60603] [PMCC Leasing Corporation 200 First Stamford Place Stamford, Connecticut 06902] Underwriters - ------------ Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Chase Securities Inc. 270 Park Avenue New York, New York 10017 Citicorp Securities, Inc. 399 Park Avenue New York, New York 10043 Credit Suisse First Boston Corporation 11 Madison Avenue New York, New York 10010 J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Exhibit C-2 [Form of Opinion of Davis Polk & Wardwell] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. [N585FE] [N620FE] [N621FE] [N623FE] [N676FE] [N677FE] [N678FE] [N679FE] [N680FE] [N681FE] [N682FE] Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. ([N585FE] [N620FE] [N621FE] [N623FE] [N676FE] [N677FE] [N678FE] [N679FE] [N680FE] [N681FE] [N682FE]), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant], State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one [Airbus A300F4-605R] [McDonnell Douglas MD-11F] Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents") and the forms of the Operative Agreements to be delivered on the Delivery Date. We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, Davis Polk & Wardwell SCHEDULE A ---------- Lessee and Initial Owner Pariticpant - ------------------------------------ Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Two International Place 4th Floor Boston, Massachusetts 02110 Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Initial Owner Participant - ------------------------- Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Underwriters - ------------ Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Chase Securities Inc. 2670 Park Avenue New York, New York 10017 Citicorp Securities, Inc. 399 Park Avenue New York, New York 10043 Credit Suisse First Boston Corporation 11 Madison Avenue New York, New York 10010 J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Exhibit D Form of Opinion of Company Counsel ---------------------------------- July 7, 1998 MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. CITICORP SECURITIES, INC. CREDIT SUISSE FIRST BOSTON CORPORATION J. P. MORGAN SECURITIES INC. c/o MORGAN STANLEY & CO. INCORPORATED 1585 Broadway New York, New York 10036 Re: Federal Express Corporation 1998 Pass Through Certificates, 1998-1-A, 1998-1-B and 1998-1-C (the "Offered Certificates") Ladies and Gentlemen: This opinion is directed to the Underwriters pursuant to Section 5(b)(2) of the Underwriting Agreement dated June 30, 1997 (the "Underwriting Agreement"), among the Company and you, with respect to the offer and sale of the Offered Certificates. All terms defined or used in the Underwriting Agreement have the same meaning when used herein, unless otherwise noted. I am Senior Vice President and General Counsel of the Company and have acted as such in connection with the Offered Certificates and the Underwriting Agreement. I or attorneys under my supervision have made such examination and investigation as we have deemed necessary in order to give the following opinion. Based on the foregoing, it is my opinion that: (i) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority under such laws to own its properties and to conduct its business as described in the Prospectus; the Company is a "citizen of the United States" within the meaning of Section 40102(a)(15) of Title 49 of the United States Code, as amended, holding an air 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 or more pounds of cargo; the Company is duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases real property or in which the conduct of its business requires such qualification, except for such instances which in the aggregate will not have a material adverse effect on the Company; (ii) Each subsidiary of the Company which is a significant subsidiary as defined in Rule 405 of Regulation C of the 1933 Act Regulations (each a "Significant Subsidiary") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statements, and, to the best of my knowledge, is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise; all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued and is fully paid and non-assessable, and all of such capital stock, except for directors' qualifying shares, is owned by the Company, directly or through subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance, claim or equity; (iii) Except for matters described in the Prospectus (as to which I can express no opinion at this time concerning the Company's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of the Company), there is no pending, or to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on the financial condition of the Company or the ability of the Company to perform its obligations under the Pass Through Agreements and the other Operative Agreements to which the Company is a party; (iv) The Pass Through Agreements and the other Operative Agreements to which the Company is a party have been duly and validly authorized, executed and delivered by the Company; (v) The Equipment Certificates are in due and proper form and have been duly and validly authorized by all necessary corporate action; (vi) The Company possesses all permits, approvals, franchises and other rights from federal aviation, aeronautical, communications, transportation and shipping authorities which are requisite for the conduct of its business as described in the Prospectus or for the actions contemplated by the Underwriting Agreement and the offering contemplated by the Prospectus; and the actions contemplated by the Underwriting Agreement, the Pass Through Agreements, the Participation Agreements and the other Operative Agreements, and the offering contemplated by the Prospectus, are not in violation of any federal statute or regulation relating to aviation, aeronautics, communications, transportation or shipping; (vii) The Basic Agreement is qualified under the 1939 Act; I have reviewed or caused to be reviewed by attorneys under my supervision the Registration Statements, the Prospectus and each amendment and supplement thereto (including the documents incorporated by reference) and have no reason to believe that, as of their respective effective or issue dates, or as of the Closing Time, either of the Registration Statements or the Prospectus or any such amendment or supplement (or any such documents incorporated by reference) 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 therein not misleading; (viii) I do not know of any statute or regulation or legal or governmental proceeding required to be described in the Prospectus which is not described as required, nor of any contract or document of a character required to be described in the Registration Statements or the Prospectus or to be filed as an exhibit to the Registration Statements which is not described and filed as required; and the descriptions in the Registration Statements and the Prospectus of the contracts and other documents therein described are accurate and fairly present the information required to be shown; (ix) The execution and delivery by the Company of the Underwriting Agreement, the Pass Through Agreements and the Operative Agreements to which the Company is a party, the consummation by the Company of the transactions herein and therein contemplated and compliance with the terms of the Underwriting Agreement, the Pass Through Agreements and such Operative Agreements do not and will not conflict with or result in a breach of any of the terms of the Certificate of Incorporation or By-laws of the Company, and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan, credit or note agreement, lease or other agreement or instrument material to the Company to which the Company is a party or by which it or any or its properties are bound, or any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, having jurisdiction over the Company or any of its properties; (x) No authorization, approval, consent or license of any regulatory body or authority (other than under the 1933 Act, the 1939 Act and the securities or Blue Sky laws of the various states) is required for the valid authorization, issuance, sale and delivery of the Offered Certificates as herein contemplated or the valid authorization, execution, delivery and performance by the Company of the Underwriting Agreement, the Pass Through Agreements and the other Operative Agreements to which the Company is a party or the consummation by the Company of the transactions contemplated herein or therein, or, if so required, all such authorizations, approvals, consents and licenses, specifying the sale, have been obtained and are in full force and effect; (xi) The Registration Statements have become effective under the 1933 Act and, to the best of my knowledge, no stop order suspending the effectiveness of either Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the 1933 Act; the Registration Statements and the Prospectus, and each amendment or supplement thereto (except for the financial statements and schedules included therein, as to which I express no opinion), comply as to form in all material respects to the requirements of the 1933 Act and the 1933 Act Regulations and, as to documents incorporated therein, to the requirements of the 1934 Act and the 1934 Act Regulations in effect at the time such documents were filed with the Commission; and (xii) The Underwriting Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforcement thereof is limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting enforcement of creditors' rights or by general equity principles and subject to any principles of public policy limiting the right to enforce the indemnification and contribution provisions contained in Sections 6 and 7 of the Underwriting Agreement. In rendering the foregoing opinion, I have assumed that (i) all signatures on all documents examined by us are genuine and that where any such signature (other than a signature purporting to have been made on behalf of the Company) purports to have been made in a corporate, governmental, fiduciary or other capacity, the person who affixed such signature had the due authority to do so, (ii) certain factual matters contained in certificates of public officials are accurate, true and correct, and (iii) photostatic copies of such documents, records and certificates conform to the originals. This opinion is intended solely for the benefit of the Underwriters and is not to be relied on by, and no copies of it are to be delivered to, any other person without my prior written consent, except that Underwriters' counsel may rely upon this opinion as to all matters of Tennessee law or Delaware corporate law in rendering its opinion of even date herewith. I am not assuming any professional responsibility to any other person by rendering this opinion. It is understood that this opinion speaks as of the date given, notwithstanding any delivery as contemplated above on any other date. ____________________ Karen M. Clayborne Schedule I to Underwriting Agreement Dated: June 30, 1998 FEDERAL EXPRESS CORPORATION Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C
Aggregate Aggregate Aggregate Amount of Amount of Amount of 1998-1-A 1998-1-B 1998-1-C Total Pass Pass Pass Aggregate Through Through Through Amount to be Underwriters Certificates Certificates Certificates Purchased - --------------------------------------- -------------- -------------- -------------- -------------- MORGAN STANLEY & CO. $91,617,000 $35,722,000 $39,359,000 $166,698,000 INCORPORATED CHASE SECURITIES INC. 91,615,000 35,721,000 39,359,000 166,695,000 CITICORP SECURITIES, INC. 91,615,000 35,721,000 39,359,000 166,695,000 CREDIT SUISSE FIRST BOSTON 91,615,000 35,721,000 39,359,000 166,695,000 CORPORATION J. P. MORGAN SECURITIES INC. 91,615,000 35,721,000 39,359,000 166,695,000
Schedule II to Underwriting Agreement Dated: June 30, 1998 FEDERAL EXPRESS CORPORATION Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C To: Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Re: Underwriting Agreement dated June 30, 1998 Title of Offered Certificates: Pass Through Certificates, 1998-1-A Pass Through Certificates, 1998-1-B Pass Through Certificates, 1998-1-C Current ratings: Moody's S&P ------- --- Class A Aa2 AAA Class B A1 AA- Class C Baa1 BBB+ Interest rate: Class A ........ 6.720% Class B ........ 6.845% Class C ........ 7.020% Interest payable: each January 15 and July 15 commencing on January 15, 1998 Public offering price: 100%, plus accrued interest from July 7, 1998 Closing date, time and location: July 7, 1998, 9:00 A.M., New York City time Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Location for checking Offered Certificates: New York, New York Listing requirement: None Other terms and conditions: The Offered Certificates will be issued in fully registered, book-entry only form through the facilities of The Depository Trust Company, and each Class of the Offered Certificates shall be represented by a separate global certificate. Exceptions, if any, to Section 3(i) of the Underwriting Agreement: None MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES, INC. CITICORP SECURITIES, INC. CREDIT SUISSE FIRST BOSTON CORPORATION J. P. MORGAN SECURITIES INC. By: Morgan Stanley & Co. Incorporated By:/s/ Morgan Stanley & Co. Incorporated ----------------------------------------- Name: Title: Acting on behalf of themselves and the other named Underwriters Accepted: FEDERAL EXPRESS CORPORATION By: /s/ Robert D. Henning ----------------------------------- Name: Robert D. Henning Title: Vice President and Treasurer EX-4.A3 3 EXHIBIT 4.a.3 - -------------------------------------------------------------------------------- SERIES SUPPLEMENT 1998-1-A Dated July 7, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Pass Through Trustee and FEDERAL EXPRESS CORPORATION to PASS THROUGH TRUST AGREEMENT Dated as of May 1, 1997 $458,077,000 Federal Express Corporation Pass Through Trust, 1998-1-A Federal Express Corporation 1998-1 Pass Through Certificates, Class A - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page RECITALS.................................................................. 1 ARTICLE I CERTAIN DEFINITIONS ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount........................... 5 Section 2.02. Declaration of Trust; Authorization...................... 6 Section 2.03. Issuance of Pass Through Certificates.................... 6 Section 2.04. Purchase of Equipment Certificates....................... 6 Section 2.05. Representations and Warranties of the Company............ 6 Section 2.06. The Intercreditor Agreement.............................. 7 Section 2.07. Conditions Precedent..................................... 7 Section 2.08. Acceptance of Appointment of Pass Through Trustee........ 7 ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates....................................... 7 Section 3.02. Record Dates............................................. 7 Section 3.03. Certificate Account and Special Payments Account......... 8 Section 3.04. Form of Pass Through Certificates........................ 8 Section 3.05. Indenture Documents...................................... 8 Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar................................................ 8 Section 3.07. Predelivery Funding...................................... 9 Section 3.08. ERISA.................................................... 9 Section 3.09. Intercreditor Agreement.................................. 9 Section 3.10. Ranking of Equipment Certificates........................ 9 Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates............................................. 9 Section 3.12. Ranking of 1998-1-A Pass Through Certificates............ 9 Section 3.13. Liquidity Facility....................................... 9 Section 3.14. Purchase Rights of Certificateholders.................... 10 Section 3.15. PTC Event of Default..................................... 10 Section 3.16. Amendment to Schedule of Principal Payments.............. 10 Section 3.17. Information Available to Beneficial Owners............... 10 ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form.......................... 10 Section 4.02. Reports by the Company................................... 11 Section 4.03. Modification and Ratification of Pass Through Agreement.. 11 Section 4.04. Termination.............................................. 11 EXHIBIT A Form of Pass Through Certificate SCHEDULE I Equipment Certificates; related Indenture Documents SCHEDULE II Cut-Off Date for each of the Aircraft SERIES SUPPLEMENT 1998-1-A SERIES SUPPLEMENT 1998-1-A, dated July 7, 1998 (this "Series Supplement"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Company") and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Pass Through Trustee (the "Pass Through Trustee"), to the Pass Through Trust Agreement, dated as of May 1, 1997 (the "Pass Through Agreement"), between the Company and the Pass Through Trustee. RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, Section 2.01 of the Pass Through Agreement provides, among other things, that the Company and the Pass Through Trustee may execute and deliver one or more series supplements, each for the purpose of forming a separate pass through trust for the benefit of the certificateholders of the class of pass through certificates to be issued pursuant to such pass through trust, appointing an institution to act as Pass Through Trustee if different from the institution executing the Pass Through Agreement, establishing certain terms of such pass through certificates, and pursuant to which the pass through certificates of such class shall be executed and authenticated by the Pass Through Trustee and delivered as directed by the Company; WHEREAS, pursuant to the Participation Agreements, the Company has agreed to cause the Equipment Certificates to be issued and sold to the Pass Through Trustee, and the Pass Through Trustee has agreed to purchase the Equipment Certificates, which will be held in trust as Trust Property for the benefit of the Certificateholders; WHEREAS, in order to facilitate such sale, the Company has agreed, pursuant to the Underwriting Agreement, to cause the Pass Through Trustee to issue and sell the Pass Through Certificates to the Underwriters; WHEREAS, pursuant to the Pass Through Agreement and the terms of this Series Supplement, the Pass Through Trustee will execute, authenticate and deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of the purchase price therefor, which will be applied in accordance with this Series Supplement to purchase the Equipment Certificates; WHEREAS, the Pass Through Trustee hereby declares the creation of this Pass Through Trust for the benefit of the Certificateholders, and the initial Certificateholders of such Pass Through Certificates, as the grantors of such Pass Through Trust, by their respective acceptances of such Pass Through Certificates, join in the creation of such Pass Through Trust; WHEREAS, to facilitate the sale of the Equipment Certificates to, and the purchase of the Equipment Certificates by, the Pass Through Trustee on behalf of this Pass Through Trust, the Company has duly authorized the execution and delivery of this Series Supplement as the "issuer," as such term is defined in and solely for purposes of the Securities Act, of the Pass Through Certificates and as the "obligor," as such term is defined in and solely for purposes of the Trust Indenture Act, with respect to all such Pass Through Certificates; and WHEREAS, this Series Supplement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions; IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I CERTAIN DEFINITIONS All terms used in this Series Supplement that are defined in the Pass Through Agreement, either directly or by reference therein, have the meanings assigned to them therein as supplemented by this Article I, if applicable, except to the extent the context requires otherwise. Any such defined term that is defined in the Pass Through Agreement as relating to a particular Pass Through Trust or Class rather than to any Pass Through Trust or Class generally shall, when used in this Series Supplement, relate solely to the Federal Express Corporation Pass Through Trust, 1998-1-A, or the Federal Express Corporation 1998-1 Pass Through Certificates, Class A, as the case may be, whether or not expressly so stated herein. "Aircraft" means five McDonnell Douglas MD-11F aircraft and eight Airbus A300F4-605R aircraft, including the Engines (as such term is defined in the related Participation Agreement) relating thereto, leased, or expected to be leased, by the related Owner Trustee to the Company pursuant to one of thirteen separate Leases, and, collectively, means all of the foregoing. "Aircraft Delivery Date" means, for each Aircraft, the date on which such Aircraft is delivered and sold to the Lessor (as such term is defined in the related Participation Agreement) and leased by the Lessor to the Lessee (as such term is defined in the related Participation Agreement) under the Lease (as such term is defined in the related Participation Agreement), which date shall also be the date of the initial Lease Supplement (as such term is defined in the related Participation Agreement). "Authenticating Agent" has the meaning set forth in Section 3.06 hereof. "Certificate Account" means the Certificate Account specified in Section 3.03 hereof. "Certificateholders" means the Certificateholders of the Class of Pass Through Certificates designated in Section 2.01 hereof. "Class" means the single class of Pass Through Certificates issued by a particular Pass Through Trust. "Collateral Account" means each of the Collateral Accounts established pursuant to the Indentures for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, into which the proceeds of sale of the related Equipment Certificates will be deposited respectively. "Cut-Off Date" means the date listed on Schedule II hereto for each undelivered Aircraft. "Delivery Date" means, for any Equipment Certificates, the Refunding Date, if any, or otherwise the Pass Through Closing Date (as such terms are defined in the related Participation Agreement) for such Equipment Certificates. "Equipment Certificates" means those Equipment Trust Certificates listed in Schedule I hereto. "Final Expected Distribution Date" means January 15, 2022. "Final Legal Distribution Date" means July 15, 2023. "Intercreditor Agreement" means the Intercreditor Agreement dated as of June 15, 1998 among the Pass Through Trustee, the Liquidity Provider and the Subordination Agent. "Interest Drawing" has the meaning specified in the Intercreditor Agreement. "Issuance Date" means the date defined as the Closing Time in the Underwriting Agreement. "Liquidity Facility" means the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates dated as of June 15, 1998 between the Subordination Agent and the Liquidity Provider. "Liquidity Provider" means Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany or any replacement liquidity provider. "Participation Agreements" means those Participation Agreements listed in Schedule I hereto. "Pass Through Certificates" means the Pass Through Certificates designated in Section 2.01 hereof. "Pass Through Trust," "this Pass Through Trust" and other like words means the Pass Through Trust designated in Section 2.01 hereof. "Paying Agent" means the Person specified as such in Section 3.06 hereof. "Pool Balance" means, for any Pass Through Trust or for the Pass Through Certificates issued by any Pass Through Trust, as of any date, the original aggregate face amount of the Pass Through Certificates of such Pass Through Trust less the aggregate amount of all payments on such Pass Through Certificates other than payments made in respect of interest or premium or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on the Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "Pool Factor" means, for any Pass Through Trust as of any Regular Distribution Date or Special Distribution Date the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the original aggregate face amount of the Pass Through Certificates of the related Class. The Pool Factor for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on such Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "PTC Event of Default" has the meaning set forth in Section 3.15 hereof. "Record Date" means any Record Date specified in Section 3.02 hereof. "Registrar" means the Person specified as such in Section 3.06 hereof. "Regular Distribution Date" means any Regular Distribution Date specified in Section 3.01 hereof. "Special Distribution Date" means, for any Special Payment, the Special Distribution Date for such Special Payment specified in Section 3.01 hereof. "Special Payments Account" means the Special Payments Account specified in Section 3.03 hereof. "Specified Investments" has the meaning set forth in Schedule II to the Participation Agreements. "Subordination Agent" means First Security Bank, National Association, a national banking association. "Trust Property" means, for this Pass Through Trust: (i) the Equipment Certificates held in this Pass Through Trust; (ii) the rights of this Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights); (iii) all monies receivable under the Liquidity Facility for this Pass Through Trust; and (iv) funds from time to time deposited with the Pass Through Trustee in accounts relating to this Pass Through Trust. "Underwriters" means Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. "Underwriting Agreement" means the Underwriting Agreement dated June 30, 1998 among the Company and the Underwriters. ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount. The Pass Through Trust created hereby shall be designated Federal Express Corporation Pass Through Trust, 1998-1-A (herein sometimes called this "Pass Through Trust"). The Pass Through Certificates evidencing Fractional Undivided Interests in such Pass Through Trust shall be designated as the Federal Express Corporation 1998-1 Pass Through Certificates, Class A (herein sometimes called the "1998-1-A Pass Through Certificates"). The 1998-1-A Pass Through Certificates shall be the only instruments evidencing a fractional undivided interest in such Pass Through Trust. Except as provided in Sections 2.08, 2.09 and 2.11 of the Pass Through Agreement, the aggregate amount of 1998-1-A Pass Through Certificates that may be authenticated, delivered and outstanding under this Series Supplement is limited to $458,077,000. Section 2.02. Declaration of Trust; Authorization. Each initial Certificateholder, by its acceptance of any 1998-1-A Pass Through Certificate is hereby deemed (1) as grantor, to join in the creation and declaration of this Pass Through Trust and (2) as beneficiary of such Pass Through Trust, to authorize and direct the Pass Through Trustee to execute and deliver all documents to which the Pass Through Trustee is a party that may be necessary or desirable to consummate the transactions contemplated hereby and to exercise its rights and perform its duties under the Participation Agreements, the Indentures, the Pass Through Agreement, the Intercreditor Agreement and this Series Supplement. The Pass Through Trustee hereby acknowledges and accepts this grant of trust and declares that it will hold the Trust Property as Pass Through Trustee of this Pass Through Trust for the use and benefit of the Certificateholders. Section 2.03. Issuance of Pass Through Certificates. Subject to the terms set forth herein, on the Issuance Date (i) the Company shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-A Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the 1998-1-A Pass Through Certificates to the Underwriters as provided in the Underwriting Agreement upon receipt by the Pass Through Trustee of such proceeds. Section 2.04. Purchase of Equipment Certificates. On the Issuance Date, the Pass Through Trustee shall purchase, in accordance with Section 2.02 of the Pass Through Agreement, each of the Equipment Certificates upon the satisfaction or waiver of the conditions for such purchase by the Pass Through Trustee set forth in the related Participation Agreement. Section 2.05. Representations and Warranties of the Company. All of the representations and warranties of the Company set forth or incorporated by reference in Section 1 of the Underwriting Agreement are incorporated by reference in this Series Supplement as if set forth herein and the Company represents and warrants that such representations and warranties are true and correct on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date or later date (in which case such representations and warranties were correct on and as of such earlier date or will be correct on and as of such later date, as the case may be). Section 2.06. The Intercreditor Agreement. The Pass Through Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Pass Through Trustee by the Company. The Pass Through Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 2.07. Conditions Precedent. The obligations of the Pass Through Trustee to participate in the transactions described in Sections 2.03 and 2.04 hereof are subject to (i) receipt by the Pass Through Trustee of a certificate of the Company to the same effect as the certificate of the Company delivered to the Underwriters pursuant to Section 5(c) of the Underwriting Agreement, and (ii) satisfaction or waiver of the conditions for the purchase by the Underwriters of the Pass Through Certificates set forth in Section 5 of the Underwriting Agreement, which satisfaction or waiver for the purposes hereof shall be conclusively demonstrated by the receipt by the Pass Through Trustee of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-A Pass Through Certificates. Section 2.08. Acceptance of Appointment of Pass Through Trustee. First Security Bank, National Association represents and warrants that it is qualified to serve as Pass Through Trustee and satisfies the criteria specified in Section 10.02 of the Pass Through Agreement for eligibility as a Pass Through Trustee. First Security Bank, National Association hereby agrees to serve as Pass Through Trustee for the Pass Through Certificates and acknowledges its appointment as Pass Through Trustee in accordance with the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement upon the execution and delivery of this Series Supplement. ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates. The Regular Distribution Dates are each January 15 and July 15, commencing on January 15, 1999. The Special Distribution Date is any Business Day on which a Special Payment is to be distributed. Section 3.02. Record Dates. The Record Dates for the Regular Distribution Dates are December 31 and June 30, respectively, and the Record Date for any Special Distribution Date is the fifteenth day preceding such Special Distribution Date, in any event, whether or not such date is a Business Day. Section 3.03. Certificate Account and Special Payments Account. In accordance with Section 5.01(a) of the Pass Through Agreement and upon receipt of any Scheduled Payment, the Pass Through Trustee shall immediately deposit such Scheduled Payment into the Certificate Account, a separate and non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. In accordance with Section 5.01(b) of the Pass Through Agreement and upon receipt of any Special Payment, the Pass Through Trustee shall immediately deposit such Special Payment into the Special Payments Account, a separate and, except as provided in Section 5.04 of the Pass Through Agreement, non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. Section 3.04. Form of Pass Through Certificates. Subject to Section 2.07 of the Pass Through Agreement, each of the 1998-1-A Pass Through Certificates will be substantially in the form of Exhibit A hereto. The 1998-1-A Pass Through Certificates will be issued pursuant to a book-entry system in the form of one or more Registered Global Certificates and subject to the conditions set forth in the Letter of Representations among the Company, the Pass Through Trustee and The Depository Trust Company. Section 3.05. Indenture Documents. The related Indenture Documents are listed in Schedule I hereto. Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar. (a) The Pass Through Trustee may appoint an authenticating agent (the "Authenticating Agent") with respect to the Pass Through Certificates which shall be authorized to act on behalf of the Pass Through Trustee to authenticate the Pass Through Certificates issued upon original issue and upon exchange or registration of transfer thereof or pursuant to Section 2.09 of the Pass Through Agreement. Pass Through Certificates so authenticated shall be entitled to the benefits of the Pass Through Agreement and this Series Supplement and shall be valid and obligatory for all purposes as if authenticated by the Pass Through Trustee. Whenever reference is made in the Pass Through Agreement or this Series Supplement to the authentication and delivery of Pass Through Certificates by the Pass Through Trustee or the Pass Through Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Pass Through Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Pass Through Trustee by an Authenticating Agent. (b) The Paying Agent, Registrar and Authenticating Agent for the 1998-1-A Pass Through Certificates initially shall be First Security Bank, National Association. First Security Bank, National Association hereby represents and warrants to the Company that it is qualified to serve as Paying Agent, Registrar and Authenticating Agent under the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement. Section 3.07. Predelivery Funding. During the period between the date of issuance of Equipment Certificates by the Owner Trustee in respect of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE and the Aircraft Delivery Date for the related Aircraft, such Equipment Certificates will not be secured by such Aircraft or the related Lease, but will be secured by the related Collateral Account. Pursuant to the related Indenture, the Indenture Trustee on behalf of the related Owner Trustee will deposit the proceeds from the sale of the related Equipment Certificates into the related Collateral Account. Sums deposited in each Collateral Account will be invested as set forth in the Related Indenture. Section 3.08. ERISA. Any Person who is acquiring a Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of a Pass Through Certificate such that its purchase and holding of a Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. Section 3.09. Intercreditor Agreement. The 1998-1-A Pass Through Certificates are subject to the Intercreditor Agreement. Section 3.10. Ranking of Equipment Certificates. The Equipment Certificates will be subject to the ranking and priority as set forth in the related Indenture Documents. Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates. As set forth in the related Indenture Documents, there are no cross-collateralization provisions or cross-default provisions in respect of the Equipment Certificates. Section 3.12. Ranking of 1998-1-A Pass Through Certificates. The 1998-1-A Pass Through Certificates will be subject to the ranking and priority as set forth in the Intercreditor Agreement. Section 3.13. Liquidity Facility. Payments of interest on the 1998-1-A Pass Through Certificates will be supported by a Liquidity Facility to be provided by the Liquidity Provider for the benefit of the Certificateholders. Section 3.14. Purchase Rights of Certificateholders. The Certificateholders will have the purchase rights, if any, upon the occurrence and during the continuation of a Triggering Event as set forth in the Pass Through Agreement. Section 3.15. PTC Event of Default. A PTC Event of Default shall have occurred if, for any Pass Through Trust, the Pass Through Trustee shall fail to pay within 10 Business Days of the due date thereof (i) the outstanding Pool Balance of the 1998-1-A Pass Through Certificates on the Final Legal Distribution Date or (ii) interest due on the 1998-1 Pass Through Certificates on any Regular Distribution Date unless the Subordination Agent has made an Interest Drawing in an amount sufficient to pay such interest and has distributed such amount to the Certificateholders. Any failure by the Pass Through Trustee to make expected principal distributions on the 1998-1-A Pass Through Certificates on any Regular Distribution Date (other than the Final Legal Distribution Date) will not be a PTC Event of Default. Section 3.16. Amendment to Schedule of Principal Payments. Not later than the seventh Business Day preceding each of the Regular Distribution Dates in January 1999, July 1999 and January 2000, the Pass Through Trustee shall mail to Certificateholders a statement, based on the most recent information provided by the Indenture Trustees pursuant to Section 2.18 of the Indentures, setting forth the schedule of principal payments of the Equipment Certificates and the expected Pool Factors in respect of such Regular Distribution Dates, in the form of the schedule containing such information set forth in the Pass Through Certificates. Section 3.17. Information Available to Beneficial Owners. The Pass Through Trustee shall mail to any beneficial holder of Pass Through Certificates that has provided to the Pass Through Trustee a certificate (in reasonable detail satisfactory to the Pass Through Trustee) as to the principal amount of Pass Through Certificates beneficially owned and any intermediaries through which such Person's ownership interest in Pass Through Certificates is held, copies of all reports and other documents mailed to Certificateholders. The Pass Through Trustee shall mail the reports to such beneficial owners on the date such reports are mailed to Certificateholders under the Pass Through Agreement and this Series Supplement, or as soon thereafter as practicable. ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form. AS PROVIDED IN SECTION 13.14 OF THE PASS THROUGH AGREEMENT, THIS SERIES SUPPLEMENT AND EACH 1998-1-A PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Series Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 4.02. Reports by the Company. In addition to the reports required to be provided by the Company pursuant to Section 4.03 of the Pass Through Agreement, the Company agrees to furnish to the Pass Through Trustee from time to time, such other financial information as the Pass Through Trustee may reasonably request. Section 4.03. Modification and Ratification of Pass Through Agreement. The Pass Through Agreement is incorporated herein by reference in its entirety, and shall be deemed to be a part of this Series Supplement as if set forth in full herein, and is in all respects ratified and confirmed, as supplemented and modified by this Series Supplement. Section 4.04. Termination. In no event shall this Pass Through Trust continue beyond the expiration of 21 years after the death of the last survivor of George Pataki, Governor of New York State, living on the date of this Series Supplement. IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all on the day and year first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: _________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Series Supplement ----------------- FORM OF PASS THROUGH CERTIFICATE THIS IS A REGISTERED GLOBAL CERTIFICATE REFERRED TO IN SECTION 2.12 OF THE PASS THROUGH TRUST AGREEMENT. Unless this pass through certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Pass Through Trustee or its agent for registration or transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE THEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-A 1998-1 Pass Through Certificate, Class A CUSIP 31331F AX9 Final Expected Distribution Date: January 15, 2022 evidencing a fractional undivided interest in a pass through trust. Certificate No._______ Applicable interest rate on Equipment Certificates held in Pass Through Trust, 1998-1-A: 6.720%. $___________ Fractional Undivided Interest representing _______ of the Pass Through Trust per $1,000 face amount. THIS CERTIFIES THAT CEDE & CO., for value received, is the registered owner of a $_________ (_____________ dollars) Fractional Undivided Interest in the Federal Express Corporation Pass Through Trust, 1998-1-A (the "Pass Through Trust") created and declared by First Security Bank, National Association, as pass through trustee (the "Pass Through Trustee"), pursuant to the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Agreement"), as supplemented by Series Supplement 1998-1-A thereto dated July 7, 1998 (the "Series Supplement") between the Pass Through Trustee and Federal Express Corporation, a Delaware corporation (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Pass Through Agreement and the Series Supplement. This Pass Through Certificate is one of the duly authorized Pass Through Certificates designated as "Federal Express Corporation 1998-1 Pass Through Certificates, Class A." This Pass Through Certificate is issued under and is subject to the terms, provisions, and conditions of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, to which the Certificateholder of this Pass Through Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Pass Through Trust includes (i) the Equipment Certificates held in such Pass Through Trust, (ii) the rights of such Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) all monies receivable under the Liquidity Facility for such Pass Through Trust, and (iv) funds from time to time deposited with the Pass Through Trustee in accounts relating to such Pass Through Trust. (the "Trust Property"). Equipment Certificates of each series are secured by a security interest in (A) an aircraft leased to or, if any of seven Airbus A300F4-605R Aircraft or three McDonnell Douglas MD-11F Aircraft have been purchased by the Company pursuant to the related Participation Agreement, owned by the Company and, in the case of a leased aircraft, an assignment of the rights of the Related Owner Trustee with respect to such aircraft, including the right to receive rent and other amounts payable under the related Lease or Indenture with respect to such aircraft or (B) a collateral account containing the proceeds of the sale of such series of Equipment Certificates, which shall be invested in Specified Investments pursuant to the related Indenture. Each of the Pass Through Certificates represents a Fractional Undivided Interest in the Pass Through Trust and the Trust Property, and has no rights, benefits or interests in respect of any other separate trust established pursuant to the terms of the Pass Through Agreement for any other class of Pass Through Certificates issued pursuant thereto. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, from funds then available to the Pass Through Trustee, there will be distributed on each January 15 and July 15 (a "Regular Distribution Date"), commencing on January 15, 1999, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding the applicable Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Certificates due on such Regular Distribution Date, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, if Special Payments on the Equipment Certificates are received by the Pass Through Trustee, from funds then available to the Pass Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding such Special Distribution Date, an amount in respect of such Special Payments on the Equipment Certificates, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Special Payments so received. If a Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Distribution Date and no interest shall accrue during the intervening period. The Special Distribution Date shall be any Business Day on which a Special Payment is to be distributed. Distributions on this Pass Through Certificate will be made by the Pass Through Trustee to the Person entitled thereto, without the presentation or surrender of this Pass Through Certificate or the making of any notation hereon. Except as otherwise provided in the Pass Through Agreement and notwithstanding the above, the final distribution on this Pass Through Certificate will be made after notice is mailed by the Pass Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Pass Through Certificate at the office or agency of the Pass Through Trustee specified in such notice. Any Person acquiring this Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of this Pass Through Certificate such that its purchase and holding of this Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Pass Through Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Pass Through Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass Through Trustee, by manual signature, this Pass Through Certificate shall not be entitled to any benefit under the Pass Through Trust or be valid for any purpose. IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass Through Certificate to be duly executed. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-A FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION] Dated: _______, 1998 This is one of the Pass Through Certificates referred to in the within-mentioned Pass Through Agreement and the Series Supplement. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [Reverse of Pass Through Certificate] The Pass Through Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Pass Through Trustee or any affiliate thereof. The Pass Through Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. Subject to the Intercreditor Agreement, all payments or distributions made to Certificateholders under the Pass Through Agreement shall be made only from the Trust Property and only to the extent that the Pass Through Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Pass Through Agreement and the Series Supplement. Each Certificateholder of this Pass Through Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. In connection with withholding taxes, under certain circumstances the Pass Through Trustee may retain certain amounts otherwise distributable to a Certificateholder. The purchase by any Certificateholder of any Pass Through Certificate constitutes the consent of such Certificateholder to such retention in accordance with the terms of the Pass Through Agreement. This Pass Through Certificate does not purport to summarize the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and reference is made to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby. A copy of the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement may be examined by any Certificateholder upon request during normal business hours at the principal office of the Pass Through Trustee, and at such other places designated by the Pass Through Trustee. As of the date of issuance of this Pass Through Certificate, and assuming that no prepayment or default in respect of payment on the Equipment Certificates shall occur and assuming there will be no change in the payment terms of the Equipment Certificates, the aggregate scheduled repayments of principal on the Equipment Certificates for the Pass Through Trust and the resulting Pool Factors for the Pass Through Trust after taking into account each such repayment are set forth below:
Class A Trust Equipment Regular Scheduled Payments Distribution Date of Principal Expected Pool Factor - ----------------- -------------------- ---------------------- January 15, 1999 $ 131,697 0.9997125 July 15, 1999 2,538,563 0.9941707 January 15, 2000 6,525,699 0.9799249 July 15, 2000 1,008,912 0.9777224 January 15, 2001 11,045,518 0.9536096 July 15, 2001 1,008,912 0.9514071 January 15, 2002 11,025,065 0.9273389 July 15, 2002 3,215,912 0.9203185 January 15, 2003 10,981,487 0.8963455 July 15, 2003 3,699,828 0.8882686 January 15, 2004 10,031,518 0.8663694 July 15, 2004 4,649,797 0.8562187 January 15, 2005 10,031,518 0.8343195 July 15, 2005 4,649,797 0.8241688 January 15, 2006 12,658,403 0.7965350 July 15, 2006 2,022,912 0.7921189 January 15, 2007 12,658,403 0.7644851 July 15, 2007 2,022,912 0.7600690 January 15, 2008 12,658,403 0.7324353 July 15, 2008 2,022,912 0.7280192 January 15, 2009 12,846,726 0.6999743 July 15, 2009 2,022,912 0.6955582 January 15, 2010 18,537,647 0.6550897 January 15, 2011 19,504,957 0.6125097 January 15, 2012 20,367,119 0.5680474 January 15, 2013 13,128,047 0.5393884 January 15, 2014 11,662,043 0.5139297 January 15, 2015 11,662,042 0.4884710 January 15, 2016 15,702,539 0.4541918 January 15, 2017 32,542,770 0.3831496 January 15, 2018 44,045,687 0.2869962 January 15, 2019 42,153,102 0.1949743 January 15, 2020 53,352,060 0.0785047 July 15, 2020 212,563 0.0780406 January 15, 2021 20,890,132 0.0324367 January 15, 2022 14,858,486 0.0000000
Each Certificateholder of this Pass Through Certificate by its acceptance hereof, acknowledges that the terms of the Participation Agreement, the Lease and the Indenture as they relate to eleven of the aircraft may differ from the terms set forth or incorporated by reference in this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement permit, with certain exceptions provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Pass Through Trust at any time by the Company and the Pass Through Trustee with the consent of the Majority In Interest of Certificateholders in the Pass Through Trust. Any such consent by the Certificateholder of this Pass Through Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Pass Through Certificate and of any Pass Through Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement also permit the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Pass Through Certificates. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the transfer of this Pass Through Certificate is registrable in the Register upon surrender of this Pass Through Certificate for registration of transfer to the Pass Through Trustee in its capacity as Registrar, or by any successor Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass Through Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust will be issued to the designated transferee or transferees. The Pass Through Certificates are issuable only as registered Pass Through Certificates without coupons in minimum denominations of $1,000 fractional undivided interests and integral multiples thereof. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the Pass Through Certificates are exchangeable for new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Pass Through Trustee may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass Through Trustee, the Registrar, and any agent of the Pass Through Trustee or the Registrar may treat the person in whose name this Pass Through Certificate is registered as the owner hereof for all purposes, and neither the Pass Through Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Pass Through Agreement and the Series Supplement and the Pass Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and the disposition of all property held as part of the Trust Property. Schedule I to Series Supplement ----------------- Federal Express Corporation Pass Through Trust, 1998-1-A Class A Equipment Certificates; Related Indenture Documents 1. Equipment Certificates (Federal Express Corporation Trust No. N585FE): Interest Rate: 6.720% Maturity: July 15, 2020 Principal Amount: $31,384,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 2. Equipment Certificates (Federal Express Corporation Trust No. N590FE): Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $30,775,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between BMO Leasing (U.S.), Inc., as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by Bankmont Financial Corp., as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 3. Equipment Certificates (Federal Express Corporation Trust No. N620FE): Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,086,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 4. Equipment Certificates (Federal Express Corporation Trust No. N621FE): Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,372,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 5. Equipment Certificates (Federal Express Corporation Trust No. N623FE): Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,372,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 6. Equipment Certificates (Federal Express Corporation Trust No. N675FE): Interest Rate: 6.720% Maturity: January 15, 2018 Principal Amount: $33,630,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between PMCC Leasing Corporation, as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by Philip Morris Capital Corporation, as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 7. Equipment Certificates (Federal Express Corporation Trust No. N676FE): Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $32,271,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 8. Equipment Certificates (Federal Express Corporation Trust No. N677FE): Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $32,879,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 9. Equipment Certificates (Federal Express Corporation Trust No. N678FE): Interest Rate: 6.720% Maturity: January 15, 2019 Principal Amount: $31,796,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 10. Equipment Certificates (Federal Express Corporation Trust No. N679FE): Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $33,362,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 11. Equipment Certificates (Federal Express Corporation Trust No. N680FE): Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $33,154,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 12. Equipment Certificates (Federal Express Corporation Trust No. N681FE): Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $34,489,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 13. Equipment Certificates (Federal Express Corporation Trust No. N682FE): Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $34,507,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. Schedule II to Series Supplement ----------------- Cut-Off Date for each of the Undelivered Aircraft ------------------------------------------------- Federal Express Corporation Manufacturer's Serial Trust No. Number Cut-Off Date - ---------------------------- ---------------------- ------------------- N585FE 48481 December 14, 1998 N620FE 48791 June 13, 1999 N621FE 48792 September 13, 1999 N623FE 48794 September 13, 1999 N676FE 790 October 13, 1998 N677FE 791 November 24, 1998 N678FE 792 December 22, 1998 N679FE 793 January 20, 1999 N680FE 794 February 10, 1999 N681FE 799 August 18, 1999 N682FE 800 August 30, 1999
- -------------------------------------------------------------------------------- SERIES SUPPLEMENT 1998-1-B Dated July 7, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Pass Through Trustee and FEDERAL EXPRESS CORPORATION to PASS THROUGH TRUST AGREEMENT Dated as of May 1, 1997 $178,606,000 Federal Express Corporation Pass Through Trust, 1998-1-B Federal Express Corporation 1998-1 Pass Through Certificates, Class B - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page RECITALS.................................................................. 1 ARTICLE I CERTAIN DEFINITIONS ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount........................... 5 Section 2.02. Declaration of Trust; Authorization...................... 6 Section 2.03. Issuance of Pass Through Certificates.................... 6 Section 2.04. Purchase of Equipment Certificates....................... 6 Section 2.05. Representations and Warranties of the Company............ 6 Section 2.06. The Intercreditor Agreement.............................. 7 Section 2.07. Conditions Precedent..................................... 7 Section 2.08. Acceptance of Appointment of Pass Through Trustee........ 7 ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates....................................... 7 Section 3.02. Record Dates............................................. 7 Section 3.03. Certificate Account and Special Payments Account......... 8 Section 3.04. Form of Pass Through Certificates........................ 8 Section 3.05. Indenture Documents...................................... 8 Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar................................................ 8 Section 3.07. Predelivery Funding...................................... 9 Section 3.08. ERISA.................................................... 9 Section 3.09. Intercreditor Agreement.................................. 9 Section 3.10. Ranking of Equipment Certificates........................ 9 Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates............................................. 9 Section 3.12. Ranking of 1998-1-B Pass Through Certificates............ 9 Section 3.13. Liquidity Facility....................................... 9 Section 3.14. Purchase Rights of Certificateholders.................... 10 Section 3.15. PTC Event of Default..................................... 10 Section 3.16. Amendment to Schedule of Principal Payments.............. 10 Section 3.17. Information Available to Beneficial Owners............... 10 ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form.......................... 10 Section 4.02. Reports by the Company................................... 11 Section 4.03. Modification and Ratification of Pass Through Agreement.. 11 Section 4.04. Termination.............................................. 11 EXHIBIT A Form of Pass Through Certificate SCHEDULE I Equipment Certificates; related Indenture Documents SCHEDULE II Cut-Off Date for each of the Aircraft SERIES SUPPLEMENT 1998-1-B SERIES SUPPLEMENT 1998-1-B, dated July 7, 1998 (this "Series Supplement"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Company") and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Pass Through Trustee (the "Pass Through Trustee"), to the Pass Through Trust Agreement, dated as of May 1, 1997 (the "Pass Through Agreement"), between the Company and the Pass Through Trustee. RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, Section 2.01 of the Pass Through Agreement provides, among other things, that the Company and the Pass Through Trustee may execute and deliver one or more series supplements, each for the purpose of forming a separate pass through trust for the benefit of the certificateholders of the class of pass through certificates to be issued pursuant to such pass through trust, appointing an institution to act as Pass Through Trustee if different from the institution executing the Pass Through Agreement, establishing certain terms of such pass through certificates, and pursuant to which the pass through certificates of such class shall be executed and authenticated by the Pass Through Trustee and delivered as directed by the Company; WHEREAS, pursuant to the Participation Agreements, the Company has agreed to cause the Equipment Certificates to be issued and sold to the Pass Through Trustee, and the Pass Through Trustee has agreed to purchase the Equipment Certificates, which will be held in trust as Trust Property for the benefit of the Certificateholders; WHEREAS, in order to facilitate such sale, the Company has agreed, pursuant to the Underwriting Agreement, to cause the Pass Through Trustee to issue and sell the Pass Through Certificates to the Underwriters; WHEREAS, pursuant to the Pass Through Agreement and the terms of this Series Supplement, the Pass Through Trustee will execute, authenticate and deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of the purchase price therefor, which will be applied in accordance with this Series Supplement to purchase the Equipment Certificates; WHEREAS, the Pass Through Trustee hereby declares the creation of this Pass Through Trust for the benefit of the Certificateholders, and the initial Certificateholders of such Pass Through Certificates, as the grantors of such Pass Through Trust, by their respective acceptances of such Pass Through Certificates, join in the creation of such Pass Through Trust; WHEREAS, to facilitate the sale of the Equipment Certificates to, and the purchase of the Equipment Certificates by, the Pass Through Trustee on behalf of this Pass Through Trust, the Company has duly authorized the execution and delivery of this Series Supplement as the "issuer," as such term is defined in and solely for purposes of the Securities Act, of the Pass Through Certificates and as the "obligor," as such term is defined in and solely for purposes of the Trust Indenture Act, with respect to all such Pass Through Certificates; and WHEREAS, this Series Supplement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions; IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I CERTAIN DEFINITIONS All terms used in this Series Supplement that are defined in the Pass Through Agreement, either directly or by reference therein, have the meanings assigned to them therein as supplemented by this Article I, if applicable, except to the extent the context requires otherwise. Any such defined term that is defined in the Pass Through Agreement as relating to a particular Pass Through Trust or Class rather than to any Pass Through Trust or Class generally shall, when used in this Series Supplement, relate solely to the Federal Express Corporation Pass Through Trust, 1998-1-B, or the Federal Express Corporation 1998-1 Pass Through Certificates, Class B, as the case may be, whether or not expressly so stated herein. "Aircraft" means five McDonnell Douglas MD-11F aircraft and eight Airbus A300F4-605R aircraft, including the Engines (as such term is defined in the related Participation Agreement) relating thereto, leased, or expected to be leased, by the related Owner Trustee to the Company pursuant to one of thirteen separate Leases, and, collectively, means all of the foregoing. "Aircraft Delivery Date" means, for each Aircraft, the date on which such Aircraft is delivered and sold to the Lessor (as such term is defined in the related Participation Agreement) and leased by the Lessor to the Lessee (as such term is defined in the related Participation Agreement) under the Lease (as such term is defined in the related Participation Agreement), which date shall also be the date of the initial Lease Supplement (as such term is defined in the related Participation Agreement). "Authenticating Agent" has the meaning set forth in Section 3.06 hereof. "Certificate Account" means the Certificate Account specified in Section 3.03 hereof. "Certificateholders" means the Certificateholders of the Class of Pass Through Certificates designated in Section 2.01 hereof. "Class" means the single class of Pass Through Certificates issued by a particular Pass Through Trust. "Collateral Account" means each of the Collateral Accounts established pursuant to the Indentures for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, into which the proceeds of sale of the related Equipment Certificates will be deposited respectively. "Cut-Off Date" means the date listed on Schedule II hereto for each undelivered Aircraft. "Delivery Date" means, for any Equipment Certificates, the Refunding Date, if any, or otherwise the Pass Through Closing Date (as such terms are defined in the related Participation Agreement) for such Equipment Certificates. "Equipment Certificates" means those Equipment Trust Certificates listed in Schedule I hereto. "Final Expected Distribution Date" means January 15, 2019. "Final Legal Distribution Date" means July 15, 2020. "Intercreditor Agreement" means the Intercreditor Agreement dated as of June 15, 1998 among the Pass Through Trustee, the Liquidity Provider and the Subordination Agent. "Interest Drawing" has the meaning specified in the Intercreditor Agreement. "Issuance Date" means the date defined as the Closing Time in the Underwriting Agreement. "Liquidity Facility" means the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates dated as of June 15, 1998 between the Subordination Agent and the Liquidity Provider. "Liquidity Provider" means Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany or any replacement liquidity provider. "Participation Agreements" means those Participation Agreements listed in Schedule I hereto. "Pass Through Certificates" means the Pass Through Certificates designated in Section 2.01 hereof. "Pass Through Trust," "this Pass Through Trust" and other like words means the Pass Through Trust designated in Section 2.01 hereof. "Paying Agent" means the Person specified as such in Section 3.06 hereof. "Pool Balance" means, for any Pass Through Trust or for the Pass Through Certificates issued by any Pass Through Trust, as of any date, the original aggregate face amount of the Pass Through Certificates of such Pass Through Trust less the aggregate amount of all payments on such Pass Through Certificates other than payments made in respect of interest or premium or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on the Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "Pool Factor" means, for any Pass Through Trust as of any Regular Distribution Date or Special Distribution Date the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the original aggregate face amount of the Pass Through Certificates of the related Class. The Pool Factor for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on such Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "PTC Event of Default" has the meaning set forth in Section 3.15 hereof. "Record Date" means any Record Date specified in Section 3.02 hereof. "Registrar" means the Person specified as such in Section 3.06 hereof. "Regular Distribution Date" means any Regular Distribution Date specified in Section 3.01 hereof. "Special Distribution Date" means, for any Special Payment, the Special Distribution Date for such Special Payment specified in Section 3.01 hereof. "Special Payments Account" means the Special Payments Account specified in Section 3.03 hereof. "Specified Investments" has the meaning set forth in Schedule II to the Participation Agreements. "Subordination Agent" means First Security Bank, National Association, a national banking association. "Trust Property" means, for this Pass Through Trust: (i) the Equipment Certificates held in this Pass Through Trust; (ii) the rights of this Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights); (iii) all monies receivable under the Liquidity Facility for this Pass Through Trust; and (iv) funds from time to time deposited with the Pass Through Trustee in accounts relating to this Pass Through Trust. "Underwriters" means Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. "Underwriting Agreement" means the Underwriting Agreement dated June 30, 1998 among the Company and the Underwriters. ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount. The Pass Through Trust created hereby shall be designated Federal Express Corporation Pass Through Trust, 1998-1-B (herein sometimes called this "Pass Through Trust"). The Pass Through Certificates evidencing Fractional Undivided Interests in such Pass Through Trust shall be designated as the Federal Express Corporation 1998-1 Pass Through Certificates, Class B (herein sometimes called the "1998-1-B Pass Through Certificates"). The 1998-1-B Pass Through Certificates shall be the only instruments evidencing a fractional undivided interest in such Pass Through Trust. Except as provided in Sections 2.08, 2.09 and 2.11 of the Pass Through Agreement, the aggregate amount of 1998-1-B Pass Through Certificates that may be authenticated, delivered and outstanding under this Series Supplement is limited to $178,606,000. Section 2.02. Declaration of Trust; Authorization. Each initial Certificateholder, by its acceptance of any 1998-1-B Pass Through Certificate is hereby deemed (1) as grantor, to join in the creation and declaration of this Pass Through Trust and (2) as beneficiary of such Pass Through Trust, to authorize and direct the Pass Through Trustee to execute and deliver all documents to which the Pass Through Trustee is a party that may be necessary or desirable to consummate the transactions contemplated hereby and to exercise its rights and perform its duties under the Participation Agreements, the Indentures, the Pass Through Agreement, the Intercreditor Agreement and this Series Supplement. The Pass Through Trustee hereby acknowledges and accepts this grant of trust and declares that it will hold the Trust Property as Pass Through Trustee of this Pass Through Trust for the use and benefit of the Certificateholders. Section 2.03. Issuance of Pass Through Certificates. Subject to the terms set forth herein, on the Issuance Date (i) the Company shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-B Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the 1998-1-B Pass Through Certificates to the Underwriters as provided in the Underwriting Agreement upon receipt by the Pass Through Trustee of such proceeds. Section 2.04. Purchase of Equipment Certificates. On the Issuance Date, the Pass Through Trustee shall purchase, in accordance with Section 2.02 of the Pass Through Agreement, each of the Equipment Certificates upon the satisfaction or waiver of the conditions for such purchase by the Pass Through Trustee set forth in the related Participation Agreement. Section 2.05. Representations and Warranties of the Company. All of the representations and warranties of the Company set forth or incorporated by reference in Section 1 of the Underwriting Agreement are incorporated by reference in this Series Supplement as if set forth herein and the Company represents and warrants that such representations and warranties are true and correct on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date or later date (in which case such representations and warranties were correct on and as of such earlier date or will be correct on and as of such later date, as the case may be). Section 2.06. The Intercreditor Agreement. The Pass Through Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Pass Through Trustee by the Company. The Pass Through Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 2.07. Conditions Precedent. The obligations of the Pass Through Trustee to participate in the transactions described in Sections 2.03 and 2.04 hereof are subject to (i) receipt by the Pass Through Trustee of a certificate of the Company to the same effect as the certificate of the Company delivered to the Underwriters pursuant to Section 5(c) of the Underwriting Agreement, and (ii) satisfaction or waiver of the conditions for the purchase by the Underwriters of the Pass Through Certificates set forth in Section 5 of the Underwriting Agreement, which satisfaction or waiver for the purposes hereof shall be conclusively demonstrated by the receipt by the Pass Through Trustee of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-B Pass Through Certificates. Section 2.08. Acceptance of Appointment of Pass Through Trustee. First Security Bank, National Association represents and warrants that it is qualified to serve as Pass Through Trustee and satisfies the criteria specified in Section 10.02 of the Pass Through Agreement for eligibility as a Pass Through Trustee. First Security Bank, National Association hereby agrees to serve as Pass Through Trustee for the Pass Through Certificates and acknowledges its appointment as Pass Through Trustee in accordance with the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement upon the execution and delivery of this Series Supplement. ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates. The Regular Distribution Dates are each January 15 and July 15, commencing on January 15, 1999. The Special Distribution Date is any Business Day on which a Special Payment is to be distributed. Section 3.02. Record Dates. The Record Dates for the Regular Distribution Dates are December 31 and June 30, respectively, and the Record Date for any Special Distribution Date is the fifteenth day preceding such Special Distribution Date, in any event, whether or not such date is a Business Day. Section 3.03. Certificate Account and Special Payments Account. In accordance with Section 5.01(a) of the Pass Through Agreement and upon receipt of any Scheduled Payment, the Pass Through Trustee shall immediately deposit such Scheduled Payment into the Certificate Account, a separate and non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. In accordance with Section 5.01(b) of the Pass Through Agreement and upon receipt of any Special Payment, the Pass Through Trustee shall immediately deposit such Special Payment into the Special Payments Account, a separate and, except as provided in Section 5.04 of the Pass Through Agreement, non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. Section 3.04. Form of Pass Through Certificates. Subject to Section 2.07 of the Pass Through Agreement, each of the 1998-1-B Pass Through Certificates will be substantially in the form of Exhibit A hereto. The 1998-1-B Pass Through Certificates will be issued pursuant to a book-entry system in the form of one or more Registered Global Certificates and subject to the conditions set forth in the Letter of Representations among the Company, the Pass Through Trustee and The Depository Trust Company. Section 3.05. Indenture Documents. The related Indenture Documents are listed in Schedule I hereto. Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar. (a) The Pass Through Trustee may appoint an authenticating agent (the "Authenticating Agent") with respect to the Pass Through Certificates which shall be authorized to act on behalf of the Pass Through Trustee to authenticate the Pass Through Certificates issued upon original issue and upon exchange or registration of transfer thereof or pursuant to Section 2.09 of the Pass Through Agreement. Pass Through Certificates so authenticated shall be entitled to the benefits of the Pass Through Agreement and this Series Supplement and shall be valid and obligatory for all purposes as if authenticated by the Pass Through Trustee. Whenever reference is made in the Pass Through Agreement or this Series Supplement to the authentication and delivery of Pass Through Certificates by the Pass Through Trustee or the Pass Through Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Pass Through Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Pass Through Trustee by an Authenticating Agent. (b) The Paying Agent, Registrar and Authenticating Agent for the 1998-1-B Pass Through Certificates initially shall be First Security Bank, National Association. First Security Bank, National Association hereby represents and warrants to the Company that it is qualified to serve as Paying Agent, Registrar and Authenticating Agent under the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement. Section 3.07. Predelivery Funding. During the period between the date of issuance of Equipment Certificates by the Owner Trustee in respect of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE and the Aircraft Delivery Date for the related Aircraft, such Equipment Certificates will not be secured by such Aircraft or the related Lease, but will be secured by the related Collateral Account. Pursuant to the related Indenture, the Indenture Trustee on behalf of the related Owner Trustee will deposit the proceeds from the sale of the related Equipment Certificates into the related Collateral Account. Sums deposited in each Collateral Account will be invested as set forth in the Related Indenture. Section 3.08. ERISA. Any Person who is acquiring a Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of a Pass Through Certificate such that its purchase and holding of a Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. Section 3.09. Intercreditor Agreement. The 1998-1-B Pass Through Certificates are subject to the Intercreditor Agreement. Section 3.10. Ranking of Equipment Certificates. The Equipment Certificates will be subject to the ranking and priority as set forth in the related Indenture Documents. Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates. As set forth in the related Indenture Documents, there are no cross-collateralization provisions or cross-default provisions in respect of the Equipment Certificates. Section 3.12. Ranking of 1998-1-B Pass Through Certificates. The 1998-1-B Pass Through Certificates will be subject to the ranking and priority as set forth in the Intercreditor Agreement. Section 3.13. Liquidity Facility. Payments of interest on the 1998-1-B Pass Through Certificates will be supported by a Liquidity Facility to be provided by the Liquidity Provider for the benefit of the Certificateholders. Section 3.14. Purchase Rights of Certificateholders. The Certificateholders will have the purchase rights, if any, upon the occurrence and during the continuation of a Triggering Event as set forth in the Pass Through Agreement. Section 3.15. PTC Event of Default. A PTC Event of Default shall have occurred if, for any Pass Through Trust, the Pass Through Trustee shall fail to pay within 10 Business Days of the due date thereof (i) the outstanding Pool Balance of the 1998-1-B Pass Through Certificates on the Final Legal Distribution Date or (ii) interest due on the 1998-1 Pass Through Certificates on any Regular Distribution Date unless the Subordination Agent has made an Interest Drawing in an amount sufficient to pay such interest and has distributed such amount to the Certificateholders. Any failure by the Pass Through Trustee to make expected principal distributions on the 1998-1-B Pass Through Certificates on any Regular Distribution Date (other than the Final Legal Distribution Date) will not be a PTC Event of Default. Section 3.16. Amendment to Schedule of Principal Payments. Not later than the seventh Business Day preceding each of the Regular Distribution Dates in January 1999, July 1999 and January 2000, the Pass Through Trustee shall mail to Certificateholders a statement, based on the most recent information provided by the Indenture Trustees pursuant to Section 2.18 of the Indentures, setting forth the schedule of principal payments of the Equipment Certificates and the expected Pool Factors in respect of such Regular Distribution Dates, in the form of the schedule containing such information set forth in the Pass Through Certificates. Section 3.17. Information Available to Beneficial Owners. The Pass Through Trustee shall mail to any beneficial holder of Pass Through Certificates that has provided to the Pass Through Trustee a certificate (in reasonable detail satisfactory to the Pass Through Trustee) as to the principal amount of Pass Through Certificates beneficially owned and any intermediaries through which such Person's ownership interest in Pass Through Certificates is held, copies of all reports and other documents mailed to Certificateholders. The Pass Through Trustee shall mail the reports to such beneficial owners on the date such reports are mailed to Certificateholders under the Pass Through Agreement and this Series Supplement, or as soon thereafter as practicable. ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form. AS PROVIDED IN SECTION 13.14 OF THE PASS THROUGH AGREEMENT, THIS SERIES SUPPLEMENT AND EACH 1998-1-B PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Series Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 4.02. Reports by the Company. In addition to the reports required to be provided by the Company pursuant to Section 4.03 of the Pass Through Agreement, the Company agrees to furnish to the Pass Through Trustee from time to time, such other financial information as the Pass Through Trustee may reasonably request. Section 4.03. Modification and Ratification of Pass Through Agreement. The Pass Through Agreement is incorporated herein by reference in its entirety, and shall be deemed to be a part of this Series Supplement as if set forth in full herein, and is in all respects ratified and confirmed, as supplemented and modified by this Series Supplement. Section 4.04. Termination. In no event shall this Pass Through Trust continue beyond the expiration of 21 years after the death of the last survivor of George Pataki, Governor of New York State, living on the date of this Series Supplement. IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all on the day and year first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: _________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Series Supplement ----------------- FORM OF PASS THROUGH CERTIFICATE THIS IS A REGISTERED GLOBAL CERTIFICATE REFERRED TO IN SECTION 2.12 OF THE PASS THROUGH TRUST AGREEMENT. Unless this pass through certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Pass Through Trustee or its agent for registration or transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE THEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-B 1998-1 Pass Through Certificate, Class B CUSIP 31331F AY7 Final Expected Distribution Date: January 15, 2019 evidencing a fractional undivided interest in a pass through trust. Certificate No. _______ Applicable interest rate on Equipment Certificates held in Pass Through Trust, 1998-1-B: 6.845%. $___________ Fractional Undivided Interest representing _______ of the Pass Through Trust per $1,000 face amount. THIS CERTIFIES THAT CEDE & CO., for value received, is the registered owner of a $_________ (_____________ dollars) Fractional Undivided Interest in the Federal Express Corporation Pass Through Trust, 1998-1-B (the "Pass Through Trust") created and declared by First Security Bank, National Association, as pass through trustee (the "Pass Through Trustee"), pursuant to the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Agreement"), as supplemented by Series Supplement 1998-1-B thereto dated July 7, 1998 (the "Series Supplement") between the Pass Through Trustee and Federal Express Corporation, a Delaware corporation (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Pass Through Agreement and the Series Supplement. This Pass Through Certificate is one of the duly authorized Pass Through Certificates designated as "Federal Express Corporation 1998-1 Pass Through Certificates, Class B." This Pass Through Certificate is issued under and is subject to the terms, provisions, and conditions of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, to which the Certificateholder of this Pass Through Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Pass Through Trust includes (i) the Equipment Certificates held in such Pass Through Trust, (ii) the rights of such Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) all monies receivable under the Liquidity Facility for such Pass Through Trust, and (iv) funds from time to time deposited with the Pass Through Trustee in accounts relating to such Pass Through Trust. (the "Trust Property"). Equipment Certificates of each series are secured by a security interest in (A) an aircraft leased to or, if any of seven Airbus A300F4-605R Aircraft or three McDonnell Douglas MD-11F Aircraft have been purchased by the Company pursuant to the related Participation Agreement, owned by the Company and, in the case of a leased aircraft, an assignment of the rights of the Related Owner Trustee with respect to such aircraft, including the right to receive rent and other amounts payable under the related Lease or Indenture with respect to such aircraft or (B) a collateral account containing the proceeds of the sale of such series of Equipment Certificates, which shall be invested in Specified Investments pursuant to the related Indenture. Each of the Pass Through Certificates represents a Fractional Undivided Interest in the Pass Through Trust and the Trust Property, and has no rights, benefits or interests in respect of any other separate trust established pursuant to the terms of the Pass Through Agreement for any other class of Pass Through Certificates issued pursuant thereto. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, from funds then available to the Pass Through Trustee, there will be distributed on each January 15 and July 15 (a "Regular Distribution Date"), commencing on January 15, 1999, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding the applicable Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Certificates due on such Regular Distribution Date, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, if Special Payments on the Equipment Certificates are received by the Pass Through Trustee, from funds then available to the Pass Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding such Special Distribution Date, an amount in respect of such Special Payments on the Equipment Certificates, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Special Payments so received. If a Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Distribution Date and no interest shall accrue during the intervening period. The Special Distribution Date shall be any Business Day on which a Special Payment is to be distributed. Distributions on this Pass Through Certificate will be made by the Pass Through Trustee to the Person entitled thereto, without the presentation or surrender of this Pass Through Certificate or the making of any notation hereon. Except as otherwise provided in the Pass Through Agreement and notwithstanding the above, the final distribution on this Pass Through Certificate will be made after notice is mailed by the Pass Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Pass Through Certificate at the office or agency of the Pass Through Trustee specified in such notice. Any Person acquiring this Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of this Pass Through Certificate such that its purchase and holding of this Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Pass Through Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Pass Through Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass Through Trustee, by manual signature, this Pass Through Certificate shall not be entitled to any benefit under the Pass Through Trust or be valid for any purpose. IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass Through Certificate to be duly executed. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-B FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION] Dated: _______, 1998 This is one of the Pass Through Certificates referred to in the within-mentioned Pass Through Agreement and the Series Supplement. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [Reverse of Pass Through Certificate] The Pass Through Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Pass Through Trustee or any affiliate thereof. The Pass Through Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. Subject to the Intercreditor Agreement, all payments or distributions made to Certificateholders under the Pass Through Agreement shall be made only from the Trust Property and only to the extent that the Pass Through Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Pass Through Agreement and the Series Supplement. Each Certificateholder of this Pass Through Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. In connection with withholding taxes, under certain circumstances the Pass Through Trustee may retain certain amounts otherwise distributable to a Certificateholder. The purchase by any Certificateholder of any Pass Through Certificate constitutes the consent of such Certificateholder to such retention in accordance with the terms of the Pass Through Agreement. This Pass Through Certificate does not purport to summarize the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and reference is made to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby. A copy of the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement may be examined by any Certificateholder upon request during normal business hours at the principal office of the Pass Through Trustee, and at such other places designated by the Pass Through Trustee. As of the date of issuance of this Pass Through Certificate, and assuming that no prepayment or default in respect of payment on the Equipment Certificates shall occur and assuming there will be no change in the payment terms of the Equipment Certificates, the aggregate scheduled repayments of principal on the Equipment Certificates for the Pass Through Trust and the resulting Pool Factors for the Pass Through Trust after taking into account each such repayment are set forth below:
Class B Trust Equipment Regular Scheduled Payments Distribution Date of Principal Expected Pool Factor - ----------------- ------------------------ ------------------------ January 15, 1999 $ 3,479,216 0.9805202 July 15, 1999 4,015,655 0.9580368 January 15, 2000 3,622,198 0.9377565 July 15, 2000 378,342 0.9356382 January 15, 2001 3,905,761 0.9137701 July 15, 2001 378,342 0.9116518 January 15, 2002 4,564,232 0.8860971 July 15, 2002 380,960 0.8839641 January 15, 2003 3,913,469 0.8620529 July 15, 2003 1,363,424 0.8544192 January 15, 2004 4,142,715 0.8312245 July 15, 2004 1,363,424 0.8235908 January 15, 2005 3,764,238 0.8025152 July 15, 2005 1,741,900 0.7927624 January 15, 2006 4,747,548 0.7661813 July 15, 2006 758,592 0.7619340 January 15, 2007 8,998,641 0.7115514 July 15, 2007 758,592 0.7073041 January 15, 2008 9,947,415 0.6516093 July 15, 2008 766,803 0.6473161 January 15, 2009 9,714,569 0.5929250 January 15, 2010 4,195,730 0.5694335 January 15, 2011 4,385,512 0.5448794 January 15, 2012 4,698,226 0.5185744 January 15, 2013 5,263,436 0.4891048 January 15, 2014 8,221,201 0.4430750 January 15, 2015 12,610,322 0.3724709 January 15, 2016 10,392,486 0.3142842 January 15, 2017 21,901,629 0.1916589 January 15, 2018 16,259,146 0.1006253 January 15, 2019 17,972,276 0.0000000
Each Certificateholder of this Pass Through Certificate by its acceptance hereof, acknowledges that the terms of the Participation Agreement, the Lease and the Indenture as they relate to eleven of the aircraft may differ from the terms set forth or incorporated by reference in this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement permit, with certain exceptions provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Pass Through Trust at any time by the Company and the Pass Through Trustee with the consent of the Majority In Interest of Certificateholders in the Pass Through Trust. Any such consent by the Certificateholder of this Pass Through Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Pass Through Certificate and of any Pass Through Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement also permit the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Pass Through Certificates. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the transfer of this Pass Through Certificate is registrable in the Register upon surrender of this Pass Through Certificate for registration of transfer to the Pass Through Trustee in its capacity as Registrar, or by any successor Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass Through Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust will be issued to the designated transferee or transferees. The Pass Through Certificates are issuable only as registered Pass Through Certificates without coupons in minimum denominations of $1,000 fractional undivided interests and integral multiples thereof. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the Pass Through Certificates are exchangeable for new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Pass Through Trustee may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass Through Trustee, the Registrar, and any agent of the Pass Through Trustee or the Registrar may treat the person in whose name this Pass Through Certificate is registered as the owner hereof for all purposes, and neither the Pass Through Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Pass Through Agreement and the Series Supplement and the Pass Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and the disposition of all property held as part of the Trust Property. Schedule I to Series Supplement ----------------- Federal Express Corporation Pass Through Trust, 1998-1-B Class B Equipment Certificates; Related Indenture Documents 1. Equipment Certificates (Federal Express Corporation Trust No. N585FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $13,094,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 2. Equipment Certificates (Federal Express Corporation Trust No. N590FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $12,122,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between BMO Leasing (U.S.), Inc., as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by Bankmont Financial Corp., as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 3. Equipment Certificates (Federal Express Corporation Trust No. N620FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,157,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 4. Equipment Certificates (Federal Express Corporation Trust No. N621FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,264,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 5. Equipment Certificates (Federal Express Corporation Trust No. N623FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,264,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 6. Equipment Certificates (Federal Express Corporation Trust No. N675FE): Interest Rate: 6.845% Maturity: January 15, 2016 Principal Amount: $12,611,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between PMCC Leasing Corporation, as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by Philip Morris Capital Corporation, as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 7. Equipment Certificates (Federal Express Corporation Trust No. N676FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $13,080,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 8. Equipment Certificates (Federal Express Corporation Trust No. N677FE): Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $13,410,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 9. Equipment Certificates (Federal Express Corporation Trust No. N678FE): Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $12,603,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 10. Equipment Certificates (Federal Express Corporation Trust No. N679FE): Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $13,113,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 11. Equipment Certificates (Federal Express Corporation Trust No. N680FE): Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $13,321,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 12. Equipment Certificates (Federal Express Corporation Trust No. N681FE): Interest Rate: 6.845% Maturity: January 15, 2018 Principal Amount: $13,271,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 13. Equipment Certificates (Federal Express Corporation Trust No. N682FE): Interest Rate: 6.845% Maturity: January 15, 2018 Principal Amount: $13,296,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. Schedule II to Series Supplement ----------------- Cut-Off Date for each of the Undelivered Aircraft ------------------------------------------------- Federal Express Corporation Manufacturer's Serial Trust No. Number Cut-Off Date - ---------------------------- ---------------------- ------------------- N585FE 48481 December 14, 1998 N620FE 48791 June 13, 1999 N621FE 48792 September 13, 1999 N623FE 48794 September 13, 1999 N676FE 790 October 13, 1998 N677FE 791 November 24, 1998 N678FE 792 December 22, 1998 N679FE 793 January 20, 1999 N680FE 794 February 10, 1999 N681FE 799 August 18, 1999 N682FE 800 August 30, 1999
- -------------------------------------------------------------------------------- SERIES SUPPLEMENT 1998-1-C Dated July 7, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Pass Through Trustee and FEDERAL EXPRESS CORPORATION to PASS THROUGH TRUST AGREEMENT Dated as of May 1, 1997 $196,795,000 Federal Express Corporation Pass Through Trust, 1998-1-C Federal Express Corporation 1998-1 Pass Through Certificates, Class C - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page RECITALS................................................................... 1 ARTICLE I CERTAIN DEFINITIONS ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount........................... 5 Section 2.02. Declaration of Trust; Authorization...................... 6 Section 2.03. Issuance of Pass Through Certificates.................... 6 Section 2.04. Purchase of Equipment Certificates....................... 6 Section 2.05. Representations and Warranties of the Company............ 6 Section 2.06. The Intercreditor Agreement.............................. 6 Section 2.07. Conditions Precedent..................................... 7 Section 2.08. Acceptance of Appointment of Pass Through Trustee........ 7 ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates....................................... 7 Section 3.02. Record Dates............................................. 7 Section 3.03. Certificate Account and Special Payments Account......... 7 Section 3.04. Form of Pass Through Certificates........................ 8 Section 3.05. Indenture Documents...................................... 8 Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar................................................ 8 Section 3.07. Predelivery Funding...................................... 8 Section 3.08. ERISA.................................................... 9 Section 3.09. Intercreditor Agreement.................................. 9 Section 3.10. Ranking of Equipment Certificates........................ 9 Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates............................................. 9 Section 3.12. Ranking of 1998-1-C Pass Through Certificates............ 9 Section 3.13. [Reserved]............................................... 10 Section 3.14. Purchase Rights of Certificateholders.................... 10 Section 3.15. Amendment to Schedule of Principal Payments.............. 10 Section 3.16. Information Available to Beneficial Owners............... 10 ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form.......................... 10 Section 4.02. Reports by the Company................................... 11 Section 4.03. Modification and Ratification of Pass Through Agreement.. 11 Section 4.04. Termination.............................................. 11 EXHIBIT A Form of Pass Through Certificate SCHEDULE I Equipment Certificates; related Indenture Documents SCHEDULE II Cut-Off Date for each of the Aircraft SERIES SUPPLEMENT 1998-1-C SERIES SUPPLEMENT 1998-1-C, dated July 7, 1998 (this "Series Supplement"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Company") and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Pass Through Trustee (the "Pass Through Trustee"), to the Pass Through Trust Agreement, dated as of May 1, 1997 (the "Pass Through Agreement"), between the Company and the Pass Through Trustee. RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, Section 2.01 of the Pass Through Agreement provides, among other things, that the Company and the Pass Through Trustee may execute and deliver one or more series supplements, each for the purpose of forming a separate pass through trust for the benefit of the certificateholders of the class of pass through certificates to be issued pursuant to such pass through trust, appointing an institution to act as Pass Through Trustee if different from the institution executing the Pass Through Agreement, establishing certain terms of such pass through certificates, and pursuant to which the pass through certificates of such class shall be executed and authenticated by the Pass Through Trustee and delivered as directed by the Company; WHEREAS, pursuant to the Participation Agreements, the Company has agreed to cause the Equipment Certificates to be issued and sold to the Pass Through Trustee, and the Pass Through Trustee has agreed to purchase the Equipment Certificates, which will be held in trust as Trust Property for the benefit of the Certificateholders; WHEREAS, in order to facilitate such sale, the Company has agreed, pursuant to the Underwriting Agreement, to cause the Pass Through Trustee to issue and sell the Pass Through Certificates to the Underwriters; WHEREAS, pursuant to the Pass Through Agreement and the terms of this Series Supplement, the Pass Through Trustee will execute, authenticate and deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of the purchase price therefor, which will be applied in accordance with this Series Supplement to purchase the Equipment Certificates; WHEREAS, the Pass Through Trustee hereby declares the creation of this Pass Through Trust for the benefit of the Certificateholders, and the initial Certificateholders of such Pass Through Certificates, as the grantors of such Pass Through Trust, by their respective acceptances of such Pass Through Certificates, join in the creation of such Pass Through Trust; WHEREAS, to facilitate the sale of the Equipment Certificates to, and the purchase of the Equipment Certificates by, the Pass Through Trustee on behalf of this Pass Through Trust, the Company has duly authorized the execution and delivery of this Series Supplement as the "issuer," as such term is defined in and solely for purposes of the Securities Act, of the Pass Through Certificates and as the "obligor," as such term is defined in and solely for purposes of the Trust Indenture Act, with respect to all such Pass Through Certificates; and WHEREAS, this Series Supplement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions; IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I CERTAIN DEFINITIONS All terms used in this Series Supplement that are defined in the Pass Through Agreement, either directly or by reference therein, have the meanings assigned to them therein as supplemented by this Article I, if applicable, except to the extent the context requires otherwise. Any such defined term that is defined in the Pass Through Agreement as relating to a particular Pass Through Trust or Class rather than to any Pass Through Trust or Class generally shall, when used in this Series Supplement, relate solely to the Federal Express Corporation Pass Through Trust, 1998-1-C, or the Federal Express Corporation 1998-1 Pass Through Certificates, Class C, as the case may be, whether or not expressly so stated herein. "Aircraft" means five McDonnell Douglas MD-11F aircraft and eight Airbus A300F4-605R aircraft, including the Engines (as such term is defined in the related Participation Agreement) relating thereto, leased, or expected to be leased, by the related Owner Trustee to the Company pursuant to one of thirteen separate Leases, and, collectively, means all of the foregoing. "Aircraft Delivery Date" means, for each Aircraft, the date on which such Aircraft is delivered and sold to the Lessor (as such term is defined in the related Participation Agreement) and leased by the Lessor to the Lessee (as such term is defined in the related Participation Agreement) under the Lease (as such term is defined in the related Participation Agreement), which date shall also be the date of the initial Lease Supplement (as such term is defined in the related Participation Agreement). "Authenticating Agent" has the meaning set forth in Section 3.06 hereof. "Certificate Account" means the Certificate Account specified in Section 3.03 hereof. "Certificateholders" means the Certificateholders of the Class of Pass Through Certificates designated in Section 2.01 hereof. "Class" means the single class of Pass Through Certificates issued by a particular Pass Through Trust. "Collateral Account" means each of the Collateral Accounts established pursuant to the Indentures for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, into which the proceeds of sale of the related Equipment Certificates will be deposited respectively. "Cut-Off Date" means the date listed on Schedule II hereto for each undelivered Aircraft. "Delivery Date" means, for any Equipment Certificates, the Refunding Date, if any, or otherwise the Pass Through Closing Date (as such terms are defined in the related Participation Agreement) for such Equipment Certificates. "Equipment Certificates" means those Equipment Trust Certificates listed in Schedule I hereto. "Final Expected Distribution Date" means January 15, 2016. "Intercreditor Agreement" means the Intercreditor Agreement dated as of June 15, 1998 among the Pass Through Trustee, the Liquidity Provider (as defined therein) and the Subordination Agent. "Issuance Date" means the date defined as the Closing Time in the Underwriting Agreement. "Participation Agreements" means those Participation Agreements listed in Schedule I hereto. "Pass Through Certificates" means the Pass Through Certificates designated in Section 2.01 hereof. "Pass Through Trust," "this Pass Through Trust" and other like words means the Pass Through Trust designated in Section 2.01 hereof. "Paying Agent" means the Person specified as such in Section 3.06 hereof. "Pool Balance" means, for any Pass Through Trust or for the Pass Through Certificates issued by any Pass Through Trust, as of any date, the original aggregate face amount of the Pass Through Certificates of such Pass Through Trust less the aggregate amount of all payments on such Pass Through Certificates other than payments made in respect of interest or premium or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on the Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "Pool Factor" means, for any Pass Through Trust as of any Regular Distribution Date or Special Distribution Date the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the original aggregate face amount of the Pass Through Certificates of the related Class. The Pool Factor for each Pass Through Trust as of any Regular Distribution Date or Special Distribution Date will be computed after giving effect to the payment of principal, if any, on such Equipment Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof being made on that date. "Record Date" means any Record Date specified in Section 3.02 hereof. "Registrar" means the Person specified as such in Section 3.06 hereof. "Regular Distribution Date" means any Regular Distribution Date specified in Section 3.01 hereof. "Series C Prepayment Date" has the meaning set forth in the Participation Agreements relating to Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE. "Special Distribution Date" means, for any Special Payment, the Special Distribution Date for such Special Payment specified in Section 3.01 hereof. "Special Payments Account" means the Special Payments Account specified in Section 3.03 hereof. "Specified Investments" has the meaning set forth in Schedule II to the Participation Agreements. "Subordination Agent" means First Security Bank, National Association, a national banking association. "Trust Property" means, for this Pass Through Trust: (i) the Equipment Certificates held in this Pass Through Trust; (ii) the rights of this Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights); and (iii) funds from time to time deposited with the Pass Through Trustee in accounts relating to this Pass Through Trust. "Underwriters" means Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. "Underwriting Agreement" means the Underwriting Agreement dated June 30, 1998 among the Company and the Underwriters. ARTICLE II DESIGNATIONS; TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES Section 2.01. Designations; Aggregate Amount. The Pass Through Trust created hereby shall be designated Federal Express Corporation Pass Through Trust, 1998-1-C (herein sometimes called this "Pass Through Trust"). The Pass Through Certificates evidencing Fractional Undivided Interests in such Pass Through Trust shall be designated as the Federal Express Corporation 1998-1 Pass Through Certificates, Class C (herein sometimes called the "1998-1-C Pass Through Certificates"). The 1998-1-C Pass Through Certificates shall be the only instruments evidencing a fractional undivided interest in such Pass Through Trust. Except as provided in Sections 2.08, 2.09 and 2.11 of the Pass Through Agreement, the aggregate amount of 1998-1-C Pass Through Certificates that may be authenticated, delivered and outstanding under this Series Supplement is limited to $196,795,000. Section 2.02. Declaration of Trust; Authorization. Each initial Certificateholder, by its acceptance of any 1998-1-C Pass Through Certificate is hereby deemed (1) as grantor, to join in the creation and declaration of this Pass Through Trust and (2) as beneficiary of such Pass Through Trust, to authorize and direct the Pass Through Trustee to execute and deliver all documents to which the Pass Through Trustee is a party that may be necessary or desirable to consummate the transactions contemplated hereby and to exercise its rights and perform its duties under the Participation Agreements, the Indentures, the Pass Through Agreement, the Intercreditor Agreement and this Series Supplement. The Pass Through Trustee hereby acknowledges and accepts this grant of trust and declares that it will hold the Trust Property as Pass Through Trustee of this Pass Through Trust for the use and benefit of the Certificateholders. Section 2.03. Issuance of Pass Through Certificates. Subject to the terms set forth herein, on the Issuance Date (i) the Company shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-C Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the 1998-1-C Pass Through Certificates to the Underwriters as provided in the Underwriting Agreement upon receipt by the Pass Through Trustee of such proceeds. Section 2.04. Purchase of Equipment Certificates. On the Issuance Date, the Pass Through Trustee shall purchase, in accordance with Section 2.02 of the Pass Through Agreement, each of the Equipment Certificates upon the satisfaction or waiver of the conditions for such purchase by the Pass Through Trustee set forth in the related Participation Agreement. Section 2.05. Representations and Warranties of the Company. All of the representations and warranties of the Company set forth or incorporated by reference in Section 1 of the Underwriting Agreement are incorporated by reference in this Series Supplement as if set forth herein and the Company represents and warrants that such representations and warranties are true and correct on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date or later date (in which case such representations and warranties were correct on and as of such earlier date or will be correct on and as of such later date, as the case may be). Section 2.06. The Intercreditor Agreement. The Pass Through Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Pass Through Trustee by the Company. The Pass Through Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 2.07. Conditions Precedent. The obligations of the Pass Through Trustee to participate in the transactions described in Sections 2.03 and 2.04 hereof are subject to (i) receipt by the Pass Through Trustee of a certificate of the Company to the same effect as the certificate of the Company delivered to the Underwriters pursuant to Section 5(c) of the Underwriting Agreement, and (ii) satisfaction or waiver of the conditions for the purchase by the Underwriters of the Pass Through Certificates set forth in Section 5 of the Underwriting Agreement, which satisfaction or waiver for the purposes hereof shall be conclusively demonstrated by the receipt by the Pass Through Trustee of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the 1998-1-C Pass Through Certificates. Section 2.08. Acceptance of Appointment of Pass Through Trustee. First Security Bank, National Association represents and warrants that it is qualified to serve as Pass Through Trustee and satisfies the criteria specified in Section 10.02 of the Pass Through Agreement for eligibility as a Pass Through Trustee. First Security Bank, National Association hereby agrees to serve as Pass Through Trustee for the Pass Through Certificates and acknowledges its appointment as Pass Through Trustee in accordance with the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement upon the execution and delivery of this Series Supplement. ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENT ACCOUNTS; CONCERNING AUTHENTICATING AGENT, PAYING AGENT AND REGISTRAR AND THE CERTIFICATEHOLDERS; PROVISION OF CERTAIN INFORMATION Section 3.01. Distribution Dates. The Regular Distribution Dates are each January 15 and July 15, commencing on January 15, 1999. The Special Distribution Date is any Business Day on which a Special Payment is to be distributed. Section 3.02. Record Dates. The Record Dates for the Regular Distribution Dates are December 31 and June 30, respectively, and the Record Date for any Special Distribution Date is the fifteenth day preceding such Special Distribution Date, in any event, whether or not such date is a Business Day. Section 3.03. Certificate Account and Special Payments Account. In accordance with Section 5.01(a) of the Pass Through Agreement and upon receipt of any Scheduled Payment, the Pass Through Trustee shall immediately deposit such Scheduled Payment into the Certificate Account, a separate and non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. In accordance with Section 5.01(b) of the Pass Through Agreement and upon receipt of any Special Payment, the Pass Through Trustee shall immediately deposit such Special Payment into the Special Payments Account, a separate and, except as provided in Section 5.04 of the Pass Through Agreement, non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. Section 3.04. Form of Pass Through Certificates. Subject to Section 2.07 of the Pass Through Agreement, each of the 1998-1-C Pass Through Certificates will be substantially in the form of Exhibit A hereto. The 1998-1-C Pass Through Certificates will be issued pursuant to a book-entry system in the form of one or more Registered Global Certificates and subject to the conditions set forth in the Letter of Representations among the Company, the Pass Through Trustee and The Depository Trust Company. Section 3.05. Indenture Documents. The related Indenture Documents are listed in Schedule I hereto. Section 3.06. Appointment of Authenticating Agent; Paying Agent and Registrar. (a) The Pass Through Trustee may appoint an authenticating agent (the "Authenticating Agent") with respect to the Pass Through Certificates which shall be authorized to act on behalf of the Pass Through Trustee to authenticate the Pass Through Certificates issued upon original issue and upon exchange or registration of transfer thereof or pursuant to Section 2.09 of the Pass Through Agreement. Pass Through Certificates so authenticated shall be entitled to the benefits of the Pass Through Agreement and this Series Supplement and shall be valid and obligatory for all purposes as if authenticated by the Pass Through Trustee. Whenever reference is made in the Pass Through Agreement or this Series Supplement to the authentication and delivery of Pass Through Certificates by the Pass Through Trustee or the Pass Through Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Pass Through Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Pass Through Trustee by an Authenticating Agent. (b) The Paying Agent, Registrar and Authenticating Agent for the 1998-1-C Pass Through Certificates initially shall be First Security Bank, National Association. First Security Bank, National Association hereby represents and warrants to the Company that it is qualified to serve as Paying Agent, Registrar and Authenticating Agent under the provisions of, and subject to all of the terms and conditions set forth in, the Pass Through Agreement and this related Series Supplement. Section 3.07. Predelivery Funding. During the period between the date of issuance of Equipment Certificates by the Owner Trustee in respect of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE and the Aircraft Delivery Date for the related Aircraft, such Equipment Certificates will not be secured by such Aircraft or the related Lease, but will be secured by the related Collateral Account. Any such Equipment Certificates that are outstanding following the Aircraft Delivery Date for the related Aircraft and are required to be prepaid on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the related Indenture shall be secured by the related Collateral Account to and including the Series C Prepayment Date. Pursuant to the related Indenture, the Indenture Trustee on behalf of the related Owner Trustee will deposit the proceeds from the sale of the related Equipment Certificates into the related Collateral Account. Sums deposited in each Collateral Account will be invested as set forth in the Related Indenture. Section 3.08. ERISA. Any Person who is acquiring a Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of a Pass Through Certificate such that its purchase and holding of a Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. Section 3.09. Intercreditor Agreement. The 1998-1-C Pass Through Certificates are subject to the Intercreditor Agreement. Section 3.10. Ranking of Equipment Certificates. The Equipment Certificates will be subject to the ranking and priority as set forth in the related Indenture Documents. Section 3.11. No Cross-Default or Cross-Collateralization of Equipment Certificates. As set forth in the related Indenture Documents, there are no cross-collateralization provisions or cross-default provisions in respect of the Equipment Certificates. Section 3.12. Ranking of 1998-1-C Pass Through Certificates. The 1998-1-C Pass Through Certificates will be subject to the ranking and priority as set forth in the Intercreditor Agreement. Section 3.13. [Reserved]. Section 3.14. Purchase Rights of Certificateholders. The Certificateholders will have the purchase rights, if any, upon the occurrence and during the continuation of a Triggering Event as set forth in the Pass Through Agreement. Section 3.15. Amendment to Schedule of Principal Payments. Not later than the seventh Business Day preceding each of the Regular Distribution Dates in January 1999, July 1999 and January 2000, the Pass Through Trustee shall mail to Certificateholders a statement, based on the most recent information provided by the Indenture Trustees pursuant to Section 2.18 of the Indentures, setting forth the schedule of principal payments of the Equipment Certificates and the expected Pool Factors in respect of such Regular Distribution Dates, in the form of the schedule containing such information set forth in the Pass Through Certificates. Section 3.16. Information Available to Beneficial Owners. The Pass Through Trustee shall mail to any beneficial holder of Pass Through Certificates that has provided to the Pass Through Trustee a certificate (in reasonable detail satisfactory to the Pass Through Trustee) as to the principal amount of Pass Through Certificates beneficially owned and any intermediaries through which such Person's ownership interest in Pass Through Certificates is held, copies of all reports and other documents mailed to Certificateholders. The Pass Through Trustee shall mail the reports to such beneficial owners on the date such reports are mailed to Certificateholders under the Pass Through Agreement and this Series Supplement, or as soon thereafter as practicable. ARTICLE IV MISCELLANEOUS Section 4.01. Governing Law; Counterpart Form. AS PROVIDED IN SECTION 13.14 OF THE PASS THROUGH AGREEMENT, THIS SERIES SUPPLEMENT AND EACH 1998-1-C PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Series Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 4.02. Reports by the Company. In addition to the reports required to be provided by the Company pursuant to Section 4.03 of the Pass Through Agreement, the Company agrees to furnish to the Pass Through Trustee from time to time, such other financial information as the Pass Through Trustee may reasonably request. Section 4.03. Modification and Ratification of Pass Through Agreement. The Pass Through Agreement is incorporated herein by reference in its entirety, and shall be deemed to be a part of this Series Supplement as if set forth in full herein, and is in all respects ratified and confirmed, as supplemented and modified by this Series Supplement. Section 4.04. Termination. In no event shall this Pass Through Trust continue beyond the expiration of 21 years after the death of the last survivor of George Pataki, Governor of New York State, living on the date of this Series Supplement. IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all on the day and year first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: _________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Series Supplement ----------------- FORM OF PASS THROUGH CERTIFICATE THIS IS A REGISTERED GLOBAL CERTIFICATE REFERRED TO IN SECTION 2.12 OF THE PASS THROUGH TRUST AGREEMENT. Unless this pass through certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Pass Through Trustee or its agent for registration or transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE THEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-C 1998-1 Pass Through Certificate, Class C CUSIP 31331F AZ4 Final Expected Distribution Date: January 15, 2016 evidencing a fractional undivided interest in a pass through trust. Certificate No. _______ Applicable interest rate on Equipment Certificates held in Pass Through Trust, 1998-1-C: 7.020%. $___________ Fractional Undivided Interest representing _______ of the Pass Through Trust per $1,000 face amount. THIS CERTIFIES THAT CEDE & CO., for value received, is the registered owner of a $_________ (_____________ dollars) Fractional Undivided Interest in the Federal Express Corporation Pass Through Trust, 1998-1-C (the "Pass Through Trust") created and declared by First Security Bank, National Association, as pass through trustee (the "Pass Through Trustee"), pursuant to the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Agreement"), as supplemented by Series Supplement 1998-1-C thereto dated July 7, 1998 (the "Series Supplement") between the Pass Through Trustee and Federal Express Corporation, a Delaware corporation (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Pass Through Agreement and the Series Supplement. This Pass Through Certificate is one of the duly authorized Pass Through Certificates designated as "Federal Express Corporation 1998-1 Pass Through Certificates, Class C." This Pass Through Certificate is issued under and is subject to the terms, provisions, and conditions of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, to which the Certificateholder of this Pass Through Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Pass Through Trust includes (i) the Equipment Certificates held in such Pass Through Trust, (ii) the rights of such Pass Through Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), and (iii) funds from time to time deposited with the Pass Through Trustee in accounts relating to such Pass Through Trust. (the "Trust Property"). Equipment Certificates of each series are secured by a security interest in (A) an aircraft leased to or, if any of seven Airbus A300F4-605R Aircraft or three McDonnell Douglas MD-11F Aircraft have been purchased by the Company pursuant to the related Participation Agreement, owned by the Company and, in the case of a leased aircraft, an assignment of the rights of the Related Owner Trustee with respect to such aircraft, including the right to receive rent and other amounts payable under the related Lease or Indenture with respect to such aircraft or (B) a collateral account containing the proceeds of the sale of such series of Equipment Certificates, which shall be invested in Specified Investments pursuant to the related Indenture. Each of the Pass Through Certificates represents a Fractional Undivided Interest in the Pass Through Trust and the Trust Property, and has no rights, benefits or interests in respect of any other separate trust established pursuant to the terms of the Pass Through Agreement for any other class of Pass Through Certificates issued pursuant thereto. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, from funds then available to the Pass Through Trustee, there will be distributed on each January 15 and July 15 (a "Regular Distribution Date"), commencing on January 15, 1999, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding the applicable Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Certificates due on such Regular Distribution Date, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Pass Through Agreement, the Series Supplement and the Intercreditor Agreement, if Special Payments on the Equipment Certificates are received by the Pass Through Trustee, from funds then available to the Pass Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding such Special Distribution Date, an amount in respect of such Special Payments on the Equipment Certificates, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Special Payments so received. If a Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Distribution Date and no interest shall accrue during the intervening period. The Special Distribution Date shall be any Business Day on which a Special Payment is to be distributed. Distributions on this Pass Through Certificate will be made by the Pass Through Trustee to the Person entitled thereto, without the presentation or surrender of this Pass Through Certificate or the making of any notation hereon. Except as otherwise provided in the Pass Through Agreement and notwithstanding the above, the final distribution on this Pass Through Certificate will be made after notice is mailed by the Pass Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Pass Through Certificate at the office or agency of the Pass Through Trustee specified in such notice. Any Person acquiring this Pass Through Certificate will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of The Employee Retirement Income Security Act of 1974, as amended ("ERISA") or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Pass Through Certificates or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of this Pass Through Certificate such that its purchase and holding of this Pass Through Certificate will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Pass Through Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Pass Through Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass Through Trustee, by manual signature, this Pass Through Certificate shall not be entitled to any benefit under the Pass Through Trust or be valid for any purpose. IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass Through Certificate to be duly executed. FEDERAL EXPRESS CORPORATION PASS THROUGH TRUST, 1998-1-C FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION] Dated: _______, 1998 This is one of the Pass Through Certificates referred to in the within-mentioned Pass Through Agreement and the Series Supplement. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ________________________________ Authorized Signatory [Reverse of Pass Through Certificate] The Pass Through Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Pass Through Trustee or any affiliate thereof. The Pass Through Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. Subject to the Intercreditor Agreement, all payments or distributions made to Certificateholders under the Pass Through Agreement shall be made only from the Trust Property and only to the extent that the Pass Through Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Pass Through Agreement and the Series Supplement. Each Certificateholder of this Pass Through Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement. In connection with withholding taxes, under certain circumstances the Pass Through Trustee may retain certain amounts otherwise distributable to a Certificateholder. The purchase by any Certificateholder of any Pass Through Certificate constitutes the consent of such Certificateholder to such retention in accordance with the terms of the Pass Through Agreement. This Pass Through Certificate does not purport to summarize the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and reference is made to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby. A copy of the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement may be examined by any Certificateholder upon request during normal business hours at the principal office of the Pass Through Trustee, and at such other places designated by the Pass Through Trustee. As of the date of issuance of this Pass Through Certificate, and assuming that no prepayment or default in respect of payment on the Equipment Certificates shall occur and assuming there will be no change in the payment terms of the Equipment Certificates, the aggregate scheduled repayments of principal on the Equipment Certificates for the Pass Through Trust and the resulting Pool Factors for the Pass Through Trust after taking into account each such repayment are set forth below:
Class C Trust Equipment Regular Scheduled Payments Distribution Date of Principal Expected Pool Factor - ----------------- --------------------------- ------------------------ January 15, 1999 $ 6,754,153 0.9656792 July 15, 1999 6,963,583 0.9302943 January 15, 2000 2,505,219 0.9175642 July 15, 2000 906,270 0.9129590 January 15, 2001 2,968,987 0.8978723 July 15, 2001 504,456 0.8953090 January 15, 2002 2,538,338 0.8824106 July 15, 2002 504,456 0.8798472 January 15, 2003 4,343,095 0.8577781 July 15, 2003 504,456 0.8552148 January 15, 2004 10,950,741 0.7995693 July 15, 2004 504,456 0.7970060 January 15, 2005 9,532,561 0.7485669 July 15, 2005 504,456 0.7460036 January 15, 2006 6,827,965 0.7113077 July 15, 2006 504,456 0.7087444 January 15, 2007 4,279,251 0.6869997 July 15, 2007 537,612 0.6842678 January 15, 2008 5,311,847 0.6572761 January 15, 2009 3,705,475 0.6384469 January 15, 2010 3,764,280 0.6193190 January 15, 2011 6,535,963 0.5861070 January 15, 2012 7,812,839 0.5464066 January 15, 2013 18,746,361 0.4511483 January 15, 2014 29,082,826 0.3033659 January 15, 2015 29,157,545 0.1552039 January 15, 2016 30,543,353 0.0000000
Each Certificateholder of this Pass Through Certificate by its acceptance hereof, acknowledges that the terms of the Participation Agreement, the Lease and the Indenture as they relate to eleven of the aircraft may differ from the terms set forth or incorporated by reference in this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement permit, with certain exceptions provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Pass Through Trust at any time by the Company and the Pass Through Trustee with the consent of the Majority In Interest of Certificateholders in the Pass Through Trust. Any such consent by the Certificateholder of this Pass Through Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Pass Through Certificate and of any Pass Through Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Pass Through Certificate. The Pass Through Agreement, the Intercreditor Agreement and the Series Supplement also permit the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Pass Through Certificates. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the transfer of this Pass Through Certificate is registrable in the Register upon surrender of this Pass Through Certificate for registration of transfer to the Pass Through Trustee in its capacity as Registrar, or by any successor Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass Through Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust will be issued to the designated transferee or transferees. The Pass Through Certificates are issuable only as registered Pass Through Certificates without coupons in minimum denominations of $1,000 fractional undivided interests and integral multiples thereof. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the Pass Through Certificates are exchangeable for new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Pass Through Trustee may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass Through Trustee, the Registrar, and any agent of the Pass Through Trustee or the Registrar may treat the person in whose name this Pass Through Certificate is registered as the owner hereof for all purposes, and neither the Pass Through Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Pass Through Agreement and the Series Supplement and the Pass Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Pass Through Agreement, the Intercreditor Agreement and the Series Supplement and the disposition of all property held as part of the Trust Property. Schedule I to Series Supplement ----------------- Federal Express Corporation Pass Through Trust, 1998-1-C Class C Equipment Certificates; Related Indenture Documents 1. Equipment Certificates (Federal Express Corporation Trust No. N585FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $16,665,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 2. Equipment Certificates (Federal Express Corporation Trust No. N590FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,736,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between BMO Leasing (U.S.), Inc., as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by Bankmont Financial Corp., as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N590FE) dated May 27, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 3. Equipment Certificates (Federal Express Corporation Trust No. N620FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $16,757,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 4. Equipment Certificates (Federal Express Corporation Trust No. N621FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $17,164,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 5. Equipment Certificates (Federal Express Corporation Trust No. N623FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $17,164,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 6. Equipment Certificates (Federal Express Corporation Trust No. N675FE): Interest Rate: 7.020% Maturity: January 15, 2014 Principal Amount: $16,816,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Trust Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant; Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between PMCC Leasing Corporation, as Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee; Owner Participant Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by Philip Morris Capital Corporation, as the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee; and Owner Trustee Guaranty (Federal Express Corporation Trust No. N675FE) dated June 18, 1998, as amended and restated as of July 7, 1998, by State Street Bank and Trust Company, as the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee. 7. Equipment Certificates (Federal Express Corporation Trust No. N676FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,573,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 8. Equipment Certificates (Federal Express Corporation Trust No. N677FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,115,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 9. Equipment Certificates (Federal Express Corporation Trust No. N678FE): Interest Rate: 7.020% Maturity: January 15, 2015 Principal Amount: $13,621,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 10. Equipment Certificates (Federal Express Corporation Trust No. N679FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $12,558,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 11. Equipment Certificates (Federal Express Corporation Trust No. N680FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $13,836,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 12. Equipment Certificates (Federal Express Corporation Trust No. N681FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,489,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. 13. Equipment Certificates (Federal Express Corporation Trust No. N682FE): Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,301,000 Related Indenture Documents: Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee; Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Pass Through Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Subordination Agent; Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between Federal Express Corporation, as Initial Owner Participant, and State Street Bank and Trust Company of Connecticut, National Association; and Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise provided therein, but solely as Owner Trustee and Lessor, and Federal Express Corporation, as Lessee. Schedule II to Series Supplement ----------------- Cut-Off Date for each of the Undelivered Aircraft ------------------------------------------------- Federal Express Corporation Manufacturer's Serial Trust No. Number Cut-Off Date - ---------------------------- ---------------------- ------------------- N585FE 48481 December 14, 1998 N620FE 48791 June 13, 1999 N621FE 48792 September 13, 1999 N623FE 48794 September 13, 1999 N676FE 790 October 13, 1998 N677FE 791 November 24, 1998 N678FE 792 December 22, 1998 N679FE 793 January 20, 1999 N680FE 794 February 10, 1999 N681FE 799 August 18, 1999 N682FE 800 August 30, 1999
EX-4.A4 4 EXHIBIT 4.a.4 INTERCREDITOR AGREEMENT Dated as of June 15, 1998 AMONG FIRST SECURITY BANK, NATIONAL ASSOCIATION not in its individual capacity but solely as Pass Through Trustee under the Federal Express Corporation Pass Through Trust 1998-1-A, Federal Express Corporation Pass Through Trust 1998-1-B and Federal Express Corporation Pass Through Trust 1998-1-C KREDITANSTALT FUR WIEDERAUFBAU as Class A Liquidity Provider and Class B Liquidity Provider AND FIRST SECURITY BANK, NATIONAL ASSOCIATION not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and trustee hereunder 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.................................... 20 SECTION 2.2 Trust Accounts.......................................... 21 SECTION 2.3 Deposits to the Collection Account and Special Payments Account................................ 22 SECTION 2.4 Distributions of Special Payments....................... 22 SECTION 2.5 Designated Representatives.............................. 25 SECTION 2.6 Controlling Party....................................... 25 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1 Written Notice of Distribution.......................... 27 SECTION 3.2 Distribution of Amounts on Deposit in the Collection Account................................................. 29 SECTION 3.3 Distribution of Amounts on Deposit Following a Triggering Event........................................ 30 SECTION 3.4 Other Payments.......................................... 32 SECTION 3.5 Payments to the Pass Through Trustee and the Liquidity Providers..................................... 32 SECTION 3.6 Liquidity Facilities.................................... 32 SECTION 3.7 Preference Payments..................................... 38 ARTICLE IV EXERCISE OF REMEDIES SECTION 4.1 Directions from the Controlling Party................... 40 SECTION 4.2 Remedies Cumulative..................................... 41 SECTION 4.3 Discontinuance of Proceedings........................... 41 SECTION 4.4 Right of Certificateholders and Liquidity Providers to Receive Payments Not to Be Impaired........ 42 SECTION 4.5 Undertaking for Costs................................... 42 ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF THE PASS THROUGH TRUSTEE, ETC. SECTION 5.1 Notice of Indenture Event of Default or Triggering Event 42 SECTION 5.2 Indemnification......................................... 43 SECTION 5.3 No Duties Except as Specified in Intercreditor Agreement............................................... 43 SECTION 5.4 Notice from the Liquidity Providers and the Pass Through Trustee.................................... 43 ARTICLE VI THE SUBORDINATION AGENT SECTION 6.1 Authorization, Acceptance of Trusts and Duties.......... 44 SECTION 6.2 Absence of Duties....................................... 44 SECTION 6.3 No Representations or Warranties as to Documents........ 44 SECTION 6.4 No Segregation of Monies; No Interest................... 44 SECTION 6.5 Reliance; Agents; Advice of Counsel..................... 45 SECTION 6.6 Capacity in Which Acting................................ 45 SECTION 6.7 Compensation............................................ 45 SECTION 6.8 May Become Certificateholder............................ 46 SECTION 6.9 Subordination Agent Required; Eligibility............... 46 SECTION 6.10 Money to Be Held in Trust.............................. 46 ARTICLE VII INDEMNIFICATION OF SUBORDINATION AGENT SECTION 7.1 Scope of Indemnification................................ 47 ARTICLE VIII SUCCESSOR SUBORDINATION AGENT SECTION 8.1 Replacement of Subordination Agent; Appointment of Successor............................................... 47 ARTICLE IX SUPPLEMENTS AND AMENDMENTS SECTION 9.1 Amendments, Waivers, Etc................................ 48 SECTION 9.2 Subordination Agent Protected........................... 50 SECTION 9.3 Effect of Supplemental Agreements....................... 50 SECTION 9.4 Notice to Rating Agencies............................... 50 ARTICLE X MISCELLANEOUS SECTION 10.1 Termination of Intercreditor Agreement................. 50 SECTION 10.2 Intercreditor Agreement for Benefit of the Pass Through Trustees, Liquidity Providers and Subordination Agent...................... 50 SECTION 10.3 Notices................................................ 51 SECTION 10.4 Severability........................................... 52 SECTION 10.5 No Oral Modifications or Continuing Waivers............ 52 SECTION 10.6 Successors and Assigns................................. 52 SECTION 10.7 Headings............................................... 52 SECTION 10.8 Counterpart Form....................................... 52 SECTION 10.9 Subordination.......................................... 52 SECTION 10.10 GOVERNING LAW.......................................... 54 SECTION 10.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity..................................... 54 Schedule 1 Indentures Schedule 2 Participation Agreements INTERCREDITOR AGREEMENT ----------------------- INTERCREDITOR AGREEMENT dated as of June 15, 1998, among FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association ("Pass Through Trustee"), not in its individual capacity but solely as Trustee of each Pass Through Trust (each as defined below), KREDITANSTALT FUR WIEDERAUFBAU, a corporation organized under the public law of the Federal Republic of Germany ("Liquidity Provider"), as Class A Liquidity Provider and as Class B Liquidity Provider, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as expressly set forth herein, but solely as Subordination Agent and trustee hereunder (in such capacity, together with any successor appointed pursuant to Article VIII hereof, the "Subordination Agent"). WHEREAS, all capitalized terms used herein shall have the respective meanings referred to in Article I hereof; WHEREAS, pursuant to each Indenture, the related Owner Trustee proposes to issue on a nonrecourse basis three series of Equipment Trust Certificates to finance, or refinance the current indebtedness of such Owner Trustee originally incurred to finance, the purchase of the Aircraft referred to in such Indenture, which has been or will be leased to Federal Express Corporation pursuant to the related Lease; WHEREAS, pursuant to the Participation Agreements, each Pass Through Trust will acquire those Equipment Trust Certificates having an interest rate equal to the interest rate applicable to the Pass Through Certificates to be issued by such Pass Through Trust; WHEREAS, pursuant to the Pass Through Agreement, each Pass Through Trust created thereby proposes to issue a single class of Pass Through Certificates (a "Class") bearing the interest rate and having the final distribution date described in the relevant series supplement on the terms and subject to the conditions set forth therein; WHEREAS, pursuant to the Underwriting Agreement, the Underwriters propose to purchase the Pass Through Certificates issued by each Pass Through Trust in the aggregate face amount set forth opposite the name of such Pass Through Trust on Schedule I thereto on the terms and subject to the conditions set forth therein; WHEREAS, each Liquidity Provider proposes to enter into a revolving credit agreement (each, a "Liquidity Facility") with the Subordination Agent, as agent for the Pass Through Trustee of each Pass Through Trust, for the benefit of the Certificateholders of both the Class A Pass Through Trust and the Class B Pass Through Trust (but not the Class C Pass Through Trust); and WHEREAS, it is a condition precedent to the obligations of the Underwriters under the Underwriting Agreement that the Subordination Agent, the Pass Through Trustee and the Liquidity Providers agree to the terms of subordination set forth in this Agreement in respect of each Class of Pass Through Certificates, and the Subordination Agent, the Pass Through Trustee and the Liquidity Providers, by entering into this Agreement, hereby acknowledge and agree to such terms of subordination and the other provisions of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (3) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (4) the term "including" shall mean "including without limitation". "Acceleration" means, with respect to the amounts payable in respect of the Equipment Trust Certificates issued under any Indenture, the declaration or deemed declaration of such amounts to be immediately due and payable. "Accelerate", "Accelerated" and "Accelerating" have meanings correlative to the foregoing. "Adjusted Expected Distributions" means with respect to the Pass Through Certificates of any Class on any Current Distribution Date the sum of (x) the amount of accrued and unpaid interest on such Pass Through Certificates plus (y) the greater of: (A) the difference between (x) the Pool Balance of such Pass Through Certificates as of the immediately preceding Distribution Date and (y) the Pool Balance of such Pass Through Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Non-Performing Equipment Trust Certificates held in such Pass Through Trust has been paid in full and such payments have been distributed to the holders of such Pass Through Certificates; (ii) the principal of the Performing Equipment Trust Certificates has been paid when due (but without giving effect to any acceleration of Performing Equipment Trust Certificates) and has been distributed to the holders of such Pass Through Certificates; and (iii) the principal of any Equipment Trust Certificates formerly held in such Pass Through Trust which have been sold pursuant to the terms hereof have been paid in full and such payments have been distributed to the holders of such Pass Through Certificates; and (B) the amount, if any, by which (i) the Pool Balance of such Class of Pass Through Certificates as of the immediately preceding Distribution Date exceeds (ii) the Aggregate LTV Collateral Amount for such Class of Pass Through Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals, clause (B) above shall not be applicable. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate LTV Collateral Amount" means, for any Class of Pass Through Certificates for any Distribution Date, the sum of the applicable LTV Collateral Amounts for each Aircraft minus the Pool Balance for each Class of Pass Through Certificates, if any, senior to such Class after giving effect to any distribution of principal on such Distribution Date on such senior Class or Classes. "Aircraft" means, with respect to any Indenture, the "Aircraft" referred to therein. "Appraised Current Market Value" of any Aircraft means the lower of the average and the median of the most recent three LTV Appraisals of such Aircraft. "Appraisers" means Aircraft Information Services, Inc., Simat, Helliesen & Eichner, Inc. and Morten Beyer and Associates, Inc. "Available Amount" means, with respect to any Liquidity Facility on any drawing date, an amount equal to (a) the Stated Amount of such Liquidity Facility, less (b) the amount of each Interest Drawing honored by the Liquidity Provider under such Liquidity Facility on or prior to such date which has not been reimbursed or reinstated as of such date; provided that, following a Downgrade Drawing or a Final Drawing under such Liquidity Facility, the Available Amount of such Liquidity Facility shall be zero. "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 Memphis, Tennessee, New York, New York, or the city and state in which the Pass Through Trustee, the Subordination Agent or any Indenture Trustee maintains its Corporate Trust Office or receives and disburses funds. "Cash Account" means the Class A Cash Account, the Class B Cash Account or the Class C Cash Account, as applicable. "Certificateholder" means any holder of one or more Pass Through Certificates. "Class" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class A Cash 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) or 3.6(i) shall be deposited. "Class A Liquidity Facility" means, initially, the irrevocable revolving credit agreement dated as of June 15, 1998, between the Subordination Agent, as agent of the Pass Through Trustee of the Class A Pass Through Trust, and the Class A Liquidity Provider, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Liquidity Provider" means Kreditanstalt fur Wiederaufbau, 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 Pass Through Certificateholder" means, at any time, any holder of one or more Class A Pass Through Certificates. "Class A Pass Through Certificates" means the certificates issued by the Class A Pass Through Trust, substantially in the form of Exhibit A to the Class A Supplement, and authenticated by the Pass Through Trustee of the Class A Pass Through Trust, representing fractional undivided interests in the Class A Pass Through Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class A Supplement. "Class A Pass Through Trust" means the Federal Express Corporation 1998-l-A Pass Through Trust created and administered pursuant to the Class A Supplement. "Class A Supplement" means the Pass Through Trust Agreement, dated as of June 15, 1998, between Federal Express Corporation and the Pass Through Trustee, as supplemented by the Series Supplement 1998-1-A between Federal Express Corporation and the Pass Through Trustee of the Class A Pass Through Trust, governing the creation and administration of the Class A Pass Through Trust and the issuance of the Class A Pass Through Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Cash 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) or 3.6(i) shall be deposited. "Class B Liquidity Facility" means, initially, the irrevocable revolving credit agreement dated as of June 15, 1998, between the Subordination Agent, as agent of the Pass Through Trustee of the Class B Pass Through Trust, and the Class B Liquidity Provider, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Liquidity Provider" means Kreditanstalt fur Wiederaufbau, 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 Pass Through Certificateholder" means, at any time, any holder of one or more Class B Pass Through Certificates. "Class B Pass Through Certificates" means the certificates issued by the Class B Pass Through Trust, substantially in the form of Exhibit A to the Class B Supplement, and authenticated by the Pass Through Trustee of the Class B Pass Through Trust, representing fractional undivided interests in the Class B Pass Through Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class B Supplement. "Class B Pass Through Trust" means the Federal Express Corporation 1998-1-B Pass Through Trust created and administered pursuant to the Class B Supplement. "Class B Supplement" means the Pass Through Trust Agreement, dated as of June 15, 1998, between Federal Express Corporation and the Pass Through Trustee, as supplemented by the Series Supplement 1998-1-B between Federal Express Corporation and the Pass Through Trustee of the Class B Pass Through Trust, governing the creation and administration of the Class B Pass Through Trust and the issuance of the Class B Pass Through Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class C Pass Through Certificateholder" means, at any time, any holder of one or more Class C Pass Through Certificates. "Class C Pass Through Certificates" means the certificates issued by the Class C Pass Through Trust, substantially in the form of Exhibit A to the Class C Supplement, and authenticated by the Pass Through Trustee of the Class C Pass Through Trust, representing fractional undivided interests in the Class C Pass Through Trust, and any certificates issued in exchange therefor or in replacement thereof pursuant to the terms of the Class C Supplement. "Class C Pass Through Trust" means the Federal Express Corporation 1998-l-C Pass Through Trust created and administered pursuant to the Class C Supplement. "Class C Supplement" means the Pass Through Trust Agreement, dated as of June 15, 1998, between Federal Express Corporation and the Pass Through Trustee, as supplemented by the Series Supplement 1998-1-C between Federal Express Corporation and the Pass Through Trustee of the Class C Pass Through Trust, governing the creation and administration of the Class C Pass Through Trust and the issuance of the Class C Pass Through Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Closing Date" means July 7, 1998. "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 Pass Through Trustee, the Subordination Agent or any Indenture Trustee, the office of such Person in the city at which, at any particular time, its corporate trust business shall be principally administered. "Current Distribution Date" means a Distribution Date specified as a reference date for calculating the Adjusted Expected Distributions or Expected Distributions with respect to the Pass Through Certificates of any Pass Through Trust as of such Distribution Date. "Designated Representatives" means the Trustee Representatives and the LP Representatives identified under Section 2.5. "Distribution Date" means a Regular Distribution Date or a Special Distribution Date. "Dollars" or "$" means United States dollars. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c). "Downgraded Facility" has the meaning assigned to such term in Section 3.6(c). "Drawing" means an Interest Drawing, a Final Drawing or a Downgrade Drawing, as the case may be. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. An Eligible Deposit Account may be maintained with a Liquidity Provider so long as such Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of setoff and counterclaim with respect to such account; and provided further that no Cash Account may be maintained with a Liquidity Provider at any time Federal Express Corporation holds any participation in the related Liquidity Facility unless written confirmation shall have been received from each Rating Agency prior to such time to the effect that such maintenance of the Cash Account with the Liquidity Provider will not result in a withdrawal or downgrading of the ratings of the Pass Through Certificates. "Eligible Institution" means, subject to the last sentence of Section 2.2(c), (a) the corporate trust department of the Subordination Agent or any Pass Through Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent; provided that a Liquidity Provider shall not qualify as an Eligible Institution at any time Federal Express Corporation 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 Pass Through Certificates. "Equipment Trust Certificates" means, at any time, the Series A Equipment Trust Certificates, the Series B Equipment Trust Certificates and the Series C Equipment Trust Certificates, collectively, and in each case, any Equipment Trust Certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Indentures. "Expected Distributions" means, with respect to the Pass Through Certificates of any Pass Through Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that (1) the principal of the Equipment Trust Certificates held in such Pass Through 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 (2) the principal of any Equipment Trust Certificates formerly held in such Pass Through Trust that have been sold pursuant to this Agreement has been paid in full and such payments distributed to the Certificateholders. For purposes of calculating Expected Distributions, any premium paid on the Equipment Trust Certificates held in any Pass Through Trust which has not been distributed to the Certificateholders of such Pass Through Trust (other than such premium or a portion thereof applied to the payment of interest on the Pass Through Certificates of such Pass Through Trust or the reduction of the Pool Balance of such Pass Through Trust) shall be added to the amount of such Expected Distributions. "Federal Express Corporation" means Federal Express Corporation, a Delaware corporation, and its successors and assigns. "Federal Express Corporation Bankruptcy Event" means the occurrence and continuation of any of the following: (a) an order for relief shall be entered in respect of Federal Express Corporation by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or Federal Express Corporation shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or Federal Express Corporation is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or Federal Express Corporation shall file, or the Board of Directors of Federal Express Corporation shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against Federal Express Corporation in any such proceeding; or Federal Express Corporation shall file, or the Board of Directors of Federal Express Corporation shall authorize Federal Express Corporation to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (b) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of Federal Express Corporation, a custodian, receiver, trustee, or liquidator of Federal Express Corporation or of any substantial part of its property, or sequestering any substantial part of the property of Federal Express Corporation, or granting any other relief in respect of Federal Express Corporation under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of 90 days after the date of its entry; or (c) a petition against Federal Express Corporation in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within 60 days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to Federal Express Corporation, any court of competent jurisdiction shall assume jurisdiction, custody or control of Federal Express Corporation or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for 90 days. "Final Distributions" means, with respect to the Pass Through Certificates of any Pass Through Trust on any Distribution Date, the sum of (a) the aggregate amount of all accrued and unpaid interest on such Pass Through Certificates and (b) the Pool Balance of such Pass Through Certificates as of the immediately preceding Distribution Date. For purposes of calculating Final Distributions, any premium paid on the Equipment Trust Certificates held in any Pass Through Trust which has not been distributed to the Certificateholders of such Pass Through Trust shall be added to the amount of such Final Distributions. "Final Drawing" means, in respect of a Liquidity Facility, a borrowing or drawing of all available and undrawn amounts under such Liquidity Facility in accordance with the provisions thereof other than a Downgrade Drawing. "Final Legal Distribution Date" means July 15, 2023 for the Class A Pass Through Certificates, July 15, 2020 for the Class B Pass Through Certificates and January 15, 2016 for the Class C Pass Through Certificates. "Indenture" means each Trust Indenture and Security Agreement listed on Schedule I hereto, 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 Event of Default (as such term is defined in such Indenture) thereunder. "Indenture Trustee" means, with respect to any Indenture, First Security Bank, National Association, together with any other indenture trustee appointed pursuant thereto. "Initial Liquidity Provider" means Kreditanstalt fur Weideraufbau. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a). "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means, with respect to any Indenture, the "Lease" referred to therein. "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 or the Class B Liquidity Facility, as applicable. "Liquidity Obligations" means all principal, interest, fees and other amounts owing to the Liquidity Providers under the Liquidity Facilities and Articles 8, 9 and 10 of the Participation Agreements. "Liquidity Provider" means, at any time, the Class A Liquidity Provider or the Class B Liquidity Provider, as applicable. "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 Appraisal" means a current fair market appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller under no compulsion to sell and both having knowledge of all relevant facts. "LTV Collateral Amount" of any Aircraft for any Class of Pass Through Certificates on any Distribution Date means the lesser of (i) the LTV Ratio for such Class of Pass Through 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 the related Lease, the amount of the insurance proceeds paid or payable to the Indenture Trustee in respect thereof) and (ii) the outstanding principal amount of the Equipment Trust Certificates secured by such Aircraft after giving effect to any principal payments of such Equipment Trust Certificates on or before such Distribution Date. "LTV Ratio" means for the Class A Pass Through Certificates 40.0%, for the Class B Pass Through Certificates 55.0% and for the Class C Pass Through Certificates 75.0%. "Minimum Sale Price" means, with respect to any Aircraft or the Equipment Trust Certificates issued in respect of such Aircraft, at any time, the lesser of (a) 75% of the Appraised Current Market Value of such Aircraft based upon the most recent LTV Appraisal and (b) the aggregate outstanding principal amount of such Equipment Trust Certificates, plus accrued and unpaid interest thereon. "Moody's" means Moody's Investors Service, Inc. "Non-Controlling Party" means, at any time, the Pass Through Trustee or the Liquidity Provider which is not the Controlling Party at such time. "Non-Extension Drawing" has the meaning provided in Section 3.6(d). "Non-Performing Equipment Trust Certificates" means Equipment Trust Certificates other than Performing Equipment Trust Certificates. "Officer's Certificate" of any Person means a certification signed by a Responsible Officer of such Person. "Operative Agreements" means this Agreement, the Participation Agreements, the Pass Through Agreement and any other document which is an "Operative Agreement" under any Participation Agreement. "Outstanding" means, when used with respect to each Class of Pass Through Certificates, as of the date of determination, all Pass Through Certificates of such Class theretofore authenticated and delivered under the related Pass Through Agreement, except: (i) Pass Through Certificates of such Class theretofore cancelled by the Registrar (as defined in such Pass Through Agreement) or delivered to the Pass Through Trustee thereunder or such Registrar for cancellation; (ii) Pass Through Certificates of such Class for which money in the full amount required to make the final distribution with respect to such Pass Through Certificates pursuant to Section 11.01 of such Pass Through Agreement has been theretofore deposited with the Pass Through Trustee in trust for the holders of such Pass Through Certificates as provided in Section 4.01 of such Pass Through Agreement pending distribution of such money to such Certificateholders pursuant to such final distribution payment; and (iii) Pass Through Certificates of such Class in exchange for or in lieu of which other Pass Through Certificates have been authenticated and delivered pursuant to such Pass Through Agreement; provided, however, that in determining whether the holders of the requisite Outstanding amount of such Pass Through Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder, any Pass Through Certificates owned by Federal Express Corporation or any of its Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Pass Through Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Pass Through Certificates that the Pass Through Trustee knows to be so owned shall be so disregarded. Pass Through Certificates so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Pass Through Trustee the pledgee's right so to act with respect to such Pass Through Certificates and that the pledgee is not Federal Express Corporation or any of its Affiliates. "Overdue Scheduled Payment" means any Scheduled Payment which is not in fact received by the Subordination Agent within five days of the Scheduled Payment Date relating thereto. "Owner Trustee" means, with respect to any Indenture, the Owner Trustee (as defined therein) not in its individual capacity but solely as trustee under the related owner trust agreement, together with any successor trustee appointed pursuant to such owner trust agreement. "Participation Agreements" means each of the Participation Agreements listed on Schedule 2 hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pass Through Agreement" means the Pass Through Trust Agreement, dated as of May 1, 1997, between Federal Express Corporation and the Pass Through Trustee, as supplemented by the Series Supplement 1998-1-A, the Series Supplement 1998-1-B or the Series Supplement 1998-1-C. "Pass Through Certificate" means a Class A Pass Through Certificate, a Class B Pass Through Certificate or a Class C Pass Through Certificate, as applicable. "Pass Through Trust" means any of the Class A Pass Through Trust, the Class B Pass Through Trust or the Class C Pass Through Trust. "Pass Through Trustee" means, for the Class A, Class B and Class C Pass Through Trusts, First Security Bank, National Association, not in its individual capacity except as expressly set forth in the Class A, Class B and Class C Supplements, respectively, but solely as trustee under such supplements, together with any successor trustee appointed pursuant thereto. "Performing Certificate Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Trust Certificates are Performing Equipment Trust Certificates. "Performing Equipment Trust Certificates" means Equipment Trust Certificates issued pursuant to an Indenture with respect to which no payment default has occurred and is continuing (without giving effect to any acceleration thereof); provided that in the event of a bankruptcy proceeding involving Federal Express Corporation under Title 11 of the United States Code (the "Bankruptcy Code"), (i) any payment default existing during 60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period") shall not be taken into consideration, unless during such period the trustee in such proceeding or Federal Express Corporation refuses to assume or agree to perform its obligations under the Lease related to such Equipment Trust Certificates 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. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof. "Pool Balance" means, with respect to each Pass Through Trust or the Pass Through Certificates issued by any Pass Through Trust, as of any date, (i) the original aggregate face amount of the Pass Through Certificates of such Pass Through Trust less (ii) the aggregate amount of all payments made in respect of the Pass Through Certificates of such Trust other than payments made in respect of interest or premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Pass Through Trust or the Pass Through Certificates issued by any Pass Through Trust as of any Distribution Date shall be computed after giving effect to any payment of principal, if any, on the Equipment Trust Certificates or other Trust Property held in such Pass Through Trust and the distribution thereof to be made on such date. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "PTC Event of Default" means, with respect to each Pass Through Agreement, the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Pass Through Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Pass Through Certificates on any Distribution Date (unless, in the case of the Class A or Class B Pass Through Certificates, the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the holders of the Pass Through Certificates entitled thereto). "Rating Agencies" means, collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. Initially, the Rating Agencies shall consist of Moody's and Standard & Poor's. "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 Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. "Regular Distribution Dates" means each January 15 and July 15, commencing on July 15, 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 the Class A Pass Through Trust or the Class B Pass Through Trust, an irrevocable revolving credit agreement in substantially the form of the initial Liquidity Facility for such Pass Through Trust, including reinstatement provisions or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Class A Pass Through Certificates and the Class B Pass Through Certificates, (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), in a face amount equal to the Required Amount for such Liquidity Facility and issued by a Replacement Liquidity Provider, provided that, if a form of Liquidity Facility that is not substantially in the form of the replaced Liquidity Facility is to be used, Federal Express Corporation shall have received a satisfactory opinion of tax counsel satisfactory to Federal Express Corporation with respect to such form of Replacement Liquidity Facility (and a copy of such opinion shall be furnished to the Subordination Agent). "Replacement Liquidity Provider" means a Person having unsecured debt ratings by each Rating Agency which are equal to or higher than the Threshold Rating. "Required Amount" means, with respect to each Liquidity Facility and each Cash Account related thereto, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the related Class of Pass Through Certificates, that would be payable on such Class of Pass Through 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 Pass Through Certificates on such date and without regard to expected future payments of principal on such Class of Pass Through Certificates. "Responsible Officer" means (i) with respect to the Subordination Agent and the Pass Through Trustee, any officer in the corporate trust administration department of the Subordination Agent or the Pass Through 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 such person's 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 Trust Certificates, (i) any payment of principal and interest on such Equipment Trust Certificates (other than an Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment of interest on the corresponding Class of Pass Through 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 Trust Certificates, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Trust Certificates, or both; provided that any payment of principal of, premium, if any, or interest resulting from the redemption or purchase of any Equipment Trust Certificates shall not constitute a Scheduled Payment. The Pass Through Certificates of any Class shall be deemed to be comprised of interest and principal components, with the interest component equaling interest accrued at the Stated Interest Rate for such Class of Pass Through Certificates from (i) the later of (1) the date of the issuance thereof and (2) the most recent but preceding Regular Distribution Date to (ii) the Regular Distribution Date on which such Scheduled Payment is being made, such interest to be considered payable in arrears on such Regular Distribution Date and to be calculated and allocated in the same manner as interest on the Equipment Trust Certificates. "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 Trust Certificates" means the 6.720% Series A Equipment Trust Certificates issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Trust Certificates issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series B Equipment Trust Certificates" means the 6.845% Series B Equipment Trust Certificates issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Trust Certificates issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series C Equipment Trust Certificates" means the 7.020% Series C Equipment Trust Certificates issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Trust Certificates issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Special Distribution Date" means, with respect to any Special Payment, the date chosen by the Subordination Agent pursuant to Section 2.4(a) for the distribution of such Special Payment in accordance with this Agreement; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. "Special Payment" means any payment (other than a Scheduled Payment or a payment received pursuant to a draw under the Letter of Credit (as defined in Section 3.7 hereof) in respect of, or any proceeds of, any Equipment Trust Certificates or the Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments, payments in respect of the redemption or repurchase of any Equipment Trust Certificates and payments in respect of the sale of any Equipment Trust Certificates to the related Owner Trustee, Owner Participant or any other Person. "Special Payments Account" means the Eligible Deposit Account created pursuant to Section 2.2 as a sub-account in the Collection Account. "Specified Investments" means (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by Standard & Poor's and Moody's Investor Service, Inc., respectively, or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve Systems arranged by federal funds brokers; and (e) overnight repurchase agreements with respect to securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America of any bank or trust company which is organized under the laws of the United States or any state thereof and has capital surplus and undivided profits aggregating at least $500 million. "Standard & Poor's" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. "Stated Amount" with respect to any Liquidity Facility, means the Commitment (as defined in such Liquidity Facility) of the applicable Liquidity Provider thereunder. "Stated Interest Rate" means (i) with respect to the Class A Pass Through Certificates, 6.720% per annum, (ii) with respect to the Class B Pass Through Certificates, 6.845% per annum and (iii) with respect to the Class C Pass Through Certificates, 7.020% per annum. "Subordination Agent" means First Security Bank, National Association, not in its individual capacity except as expressly set forth herein, but solely as agent and trustee as provided for in this Agreement, together with any successor appointed pursuant to Article VIII of this Agreement. "Tax" and "Taxes" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "Threshold Rating" means, (i) for the Initial Liquidity Provider, the long-term unsecured debt rating of Aa3 by Moody's and AA- by Standard & Poor's; and (ii) for any Replacement Liquidity Provider, (A) the short-term unsecured debt rating of P-1 by Moody's and A-1+ by Standard & Poor's or (B) if such Person does not have a published short-term unsecured debt rating from each Rating Agency, the long-term unsecured debt rating of Aa3 by Moody's and AA- by Standard & Poor's. "Triggering Event" means (x) the occurrence of an Indenture Event of Default under all of the Indentures resulting in a PTC Event of Default with respect to the most senior Class of Pass Through Certificates then Outstanding, (y) the Acceleration of, or a failure to pay at final maturity, all of the outstanding Equipment Trust Certificates or (z) the occurrence of a Federal Express Corporation Bankruptcy Event. "Trust Accounts" has the meaning assigned to such term in Section 2.2(a). "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). "Underwriters" means Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation, Chase Securities Inc., Citicorp Securities, Inc. and J.P. Morgan Securities Inc. "Underwriting Agreement" means the Underwriting Agreement dated June 30, 1998, among the Underwriters and Federal Express Corporation, relating to the purchase of the Pass Through Certificates by the Underwriters, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Written Notice" means, from (i) the Pass Through Trustee or Liquidity Provider, a written instrument executed by the Designated Representative of such Person, and (ii) the Subordination Agent, a written instrument executed by a Person designated in the Officer's Certificate of the Subordination Agent delivered on the Closing Date. An invoice delivered by a Liquidity Provider pursuant to Section 3.1 in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY SECTION 2.1 Agreement to Terms of Subordination; Payments from Monies Received Only. (a) Each Pass Through Trustee hereby acknowledges and agrees to the terms of subordination set forth in this Agreement in respect of each Class of Pass Through Certificates and agrees to enforce such provisions and cause all payments in respect of the Equipment Trust Certificates and the Liquidity Facilities to be applied in accordance with the terms of this Agreement. In addition, each Pass Through Trustee hereby agrees to cause the Equipment Trust Certificates purchased by the related Pass Through Trust to be registered in the name of the Subordination Agent, as nominee for such Pass Through 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 or payments under Articles 8, 9 and 10 of the Participation Agreements, and only to the extent that the Subordination Agent shall have received sufficient income or proceeds therefrom to enable it to make such payments in accordance with the terms hereof. Each Pass Through Trustee and the Subordination Agent hereby agree and, as provided in each Pass Through Agreement, each Certificateholder, by its acceptance of a Pass Through Certificate, and each Liquidity Provider, by entering into the Liquidity Facility to which it is a party, has agreed to look solely to such amounts to the extent available for distribution to it as provided in this Agreement and that none of the Pass Through Trustees, Owner Trustees, Indenture Trustees, Owner Participants nor the Subordination Agent is personally liable to any of them for any amounts payable or any liability under this Agreement, any Pass Through Agreement, any Liquidity Facility or such Pass Through Certificate, except (in the case of the Subordination Agent) as expressly provided herein or (in the case of the Pass Through Trustee) as expressly provided in each Pass Through Agreement or (in the case of the Owner Trustees and the Indenture Trustees) as expressly provided in any Operative Agreement. SECTION 2.2 Trust Accounts. (a) Upon the execution of this Agreement, the Subordination Agent shall establish and maintain in its name (i) the Collection Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Pass Through 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 Pass Through Trustees, the Certificateholders and the Liquidity Providers. The Subordination Agent shall establish and maintain the Cash Accounts pursuant to and under the circumstances set forth in Section 3.6(f) hereof. Upon such establishment and maintenance under Section 3.6(f) hereof, the Cash 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 Specified 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; 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 at the direction of the Liquidity Provider funding such Drawing. Unless otherwise expressly provided in this Agreement (including, without limitation, with respect to Investment Earnings on deposit in the Cash 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 principal amount of such investment is to be applied and any losses shall be charged against the principal amount invested, in each case net of the Subordination Agent's reasonable fees and expenses in making such investments. The Subordination Agent shall not be liable for any loss resulting from any investment, reinvestment or liquidation required to be made under this Agreement other than by reason of its willful misconduct or gross negligence. Specified Investments and any other investment required to be made hereunder shall be held to their maturities except that any such investment may be sold (without regard to its maturity) by the Subordination Agent without instructions whenever such sale is necessary to make a distribution required under this Agreement. Uninvested funds held hereunder shall not earn or accrue interest. (c) The Subordination Agent shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon, except as otherwise provided herein with respect to Investment Earnings). The Trust Accounts shall be held in trust by the Subordination Agent under the sole dominion and control of the Subordination Agent for the benefit of the Pass Through Trustees, the Certificateholders and the Liquidity Providers, as the case may be. If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Subordination Agent shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, to which each Rating Agency may consent) establish a new Collection Account, Special Payments Account or Cash 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 Account, as the case may be. So long as the Subordination Agent 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 Trust Certificates, 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 Trust Certificates, 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 Pass Through Trustee and the Liquidity Providers. The Subordination Agent shall promptly calculate the amount of the redemption or purchase of Equipment Trust Certificates 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 Pass Through Trustee a Written Notice of such amount and the amount allocable to each Pass Through Trust. Such Written Notice shall also set the distribution date for such Special Payment (a "Special Distribution Date"), which shall be the first Business Day which follows the later to occur of (x) the 15th day after the date of such Written Notice or (y) the date the Subordination Agent receives or expects to receive such Special Payment. Amounts on deposit in the Special Payments Account shall be distributed in accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable. (b) (i) Redemptions and Purchases of Equipment Trust Certificates. So long as no Triggering Event shall have occurred (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption or purchase (including, without limitation, a purchase resulting from the sale of the Equipment Trust Certificates permitted by Article IV hereof) of all of the Equipment Trust Certificates 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 Distribution Date multiplied by (y) a fraction, the numerator of which is the aggregate outstanding principal amount of Equipment Trust Certificates being redeemed, purchased or prepaid on such Special Distribution Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Trust Certificates, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay (A) all accrued and unpaid interest then in arrears on all Liquidity Obligations plus (B) the product of (x) the aggregate amount of all accrued and unpaid interest on all Liquidity Obligations not in arrears to such Special Distribution 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 Trust Certificates being redeemed, purchased or prepaid on such Special Distribution Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Trust Certificates, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of such accrued and unpaid interest owed to each Liquidity Provider; third, such amount as shall be required (A) to pay or reimburse the Liquidity Providers in an amount equal to the amount of any unreimbursed Interest Drawings under the Liquidity Facilities shall be distributed to the Liquidity Providers or (B) so long as no Liquidity Event of Default shall have occurred and be continuing, to replenish the Cash Accounts up to their respective Required Amounts shall be deposited in the Cash Accounts, in each such case, pari passu on the basis of the amounts of such unreimbursed Interest Drawings and deficiencies; fourth, such amount as shall be required to pay in full Expected Distributions to the holders of Class A Pass Through Certificates on such Special Distribution Date shall be distributed to the Pass Through Trustee of the Class A Pass Through Trust; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of Class B Pass Through Certificates on such Special Distribution Date shall be distributed to the Pass Through Trustee of the Class B Pass Through Trust; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of Class C Pass Through Certificates on such Special Distribution Date shall be distributed to the Pass Through Trustee of the Class C Pass Through Trust; and seventh, the balance, if any, of such Special Payment shall be transferred to the Collection Account for distribution in accordance with Section 3.2 hereof. (ii) Upon the occurrence of a Triggering Event (whether or not continuing), the Subordination Agent shall make distributions of amounts on deposit in the Special Payments Account on account of the redemption or purchase of all of the Equipment Trust Certificates 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 Federal Express Corporation in respect of any Pass Through Trustee or any Liquidity Provider (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 Federal Express Corporation under any Operative Agreement in respect of any Payee, directly to the Payee entitled thereto. SECTION 2.5 Designated Representatives. (a) With the delivery of this Agreement, each Pass Through Trustee shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Pass Through 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 Pass Through Trustee certifying as to the incumbency and specimen signatures of the officers of such Pass Through Trustee and the attorney-in-fact and agents of such Pass Through Trustee (the "Trustee Representatives") authorized to give Written Notices on behalf of such Pass Through 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. (b) With the delivery of this Agreement, each Liquidity Provider shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Liquidity Provider's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (an "LP Incumbency Certificate") of any authorized signatory of such Liquidity Provider certifying as to the incumbency and specimen signatures of any officer, attorney-in-fact, agent or other designated representative of such Liquidity Provider (the "LP Representatives" and, together with the Trustee Representatives, 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 Pass Through Trustees and the Liquidity Providers hereby agree that, with respect to any Indenture at any given time, the Indenture Trustee thereunder will be directed (i) in taking, or refraining from taking, any action with respect to such Indenture or the Equipment Trust Certificates issued thereunder, so long as no Indenture Event of Default has occurred and is continuing thereunder, by the holders of at least a majority of the outstanding principal amount of such Equipment Trust Certificates (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Trust Certificates, the Subordination Agent shall act with respect to this clause (i) in accordance with the directions of the Pass Through Trustees representing holders of Pass Through Certificates representing an undivided interest in such principal amount of Equipment Trust Certificates), and (ii) after the occurrence and during the continuance of an Indenture Event of Default thereunder (which has not been cured by the applicable Owner Trustee or the applicable Owner Participant pursuant to Section 8.03 of such Indenture), in taking, or refraining from taking, any action with respect to such Indenture or such Equipment Trust Certificates, including exercising remedies thereunder (including accelerating the Equipment Trust Certificates issued thereunder or foreclosing the Lien on the Aircraft securing such Equipment Trust Certificates), by the Controlling Party. (b) The Person who shall be the "Controlling Party" with respect to any Indenture shall be: (x) the Pass Through Trustee of the Class A Pass Through Trust; (y) upon payment of Final Distributions to the holders of Class A Pass Through Certificates, the Pass Through Trustee of the Class B Pass Through Trust; and (z) upon payment of Final Distributions to the holders of Class B Pass Through Certificates, the Pass Through Trustee of the Class C Pass Through Trust. For purposes of giving effect to the foregoing, the Pass Through 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 Trust Certificates, shall exercise its voting rights in respect of the Equipment Trust Certificates as directed by the Controlling Party and any vote so exercised shall be binding upon the Pass Through Trustees and all Certificateholders. The Subordination Agent shall give written notice to all of the other parties to this Agreement promptly upon a change in the identity of the Controlling Party. Each of the parties hereto agrees that it shall not exercise any of the rights of the Controlling Party at such time as it is not the Controlling Party hereunder; provided, however, that nothing herein contained shall prevent or prohibit any Non-Controlling Party from exercising such rights as shall be specifically granted to such Non-Controlling Party hereunder and under the other Operative Agreements. (c) Notwithstanding the foregoing, the Liquidity Provider with the then greatest amount of unreimbursed Liquidity Obligations payable to it under the Liquidity Facilities shall have the right to elect, by Written Notice to the Subordination Agent and each Pass Through Trustee, to become the Controlling Party hereunder with respect to any Indenture at any time from and including the date which is 18 months after the earlier of (i) the Acceleration of the Equipment Trust Certificates under such Indenture and (ii) a Final Drawing with respect to the Liquidity Facilities, if, in the case of clauses (i) and (ii) above, at the time of such election all Liquidity Obligations owed to such Liquidity Provider under the Liquidity Facilities have not been paid in full. (d) The exercise of remedies by the Controlling Party under this Agreement shall be expressly limited by Section 4.1(a)(ii) hereof. (e) The Controlling Party shall not be entitled to require or obligate any Non-Controlling Party to provide funds necessary to exercise any right or remedy hereunder. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1 Written Notice of Distribution. (a) No later than 3:00 P.M. (New York City time) on the Business Day immediately preceding each Distribution Date (or Special Distribution Date for purposes of Section 2.4(b) hereof, as the case may be), each of the following Persons shall deliver to the Subordination Agent a Written Notice setting forth the following information as at the close of business on such Business Day: (i) With respect to the Class A Pass Through Certificates, the Pass Through Trustee of the Class A Pass Through Trust shall separately set forth the amounts to be paid in accordance with clause "fourth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (ii) With respect to the Class B Pass Through Certificates, the Pass Through Trustee of the Class B Pass Through Trust shall separately set forth the amounts to be paid in accordance with clause "fifth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (iii) With respect to the Class C Pass Through Certificates, the Pass Through Trustee of the Class C Pass Through Trust shall separately set forth the amounts to be paid in accordance with clause "sixth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (iv) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid in accordance with clauses "first", "second" and "third" of Section 3.2 or Section 2.4(b), as the case may be, hereof; and (v) Each Pass Through Trustee shall set forth the amounts to be paid to it in accordance with clause "seventh" 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 Pass Through Certificates, such schedule or similar document is to remain in effect until any substitute notice or amendment shall be given to the Subordination Agent by the party providing such notice. (b) Following the occurrence of a Triggering Event, the Subordination Agent shall request the following information from the following Persons, and each of the following Persons shall, upon the request of the Subordination Agent, deliver a Written Notice to the Subordination Agent setting forth for such Person the following information: (i) With respect to the Class A Pass Through Certificates, the Pass Through Trustee of the Class A Pass Through Trust shall separately set forth the amounts to be paid in accordance with clauses "first" and "fifth" (relating to indemnity payments made by the Class A Pass Through Certificateholders) and "sixth" of Section 3.3 hereof; (ii) With respect to the Class B Pass Through Certificates, the Pass Through Trustee of the Class B Pass Through Trust shall separately set forth the amounts to be paid in accordance with clauses "first" and "fifth" (relating to indemnity payments made by the Class B Pass Through Certificateholders) and "seventh" of Section 3.3 hereof; (iii) With respect to the Class C Pass Through Certificates, the Pass Through Trustee of the Class C Pass Through Trust shall separately set forth the amounts to be paid in accordance with clauses "first" and "fifth" (relating to indemnity payments made by the Class C Pass Through Certificateholders) and "eighth" 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 in accordance with clauses "first", "second" "third" and "fourth" of Section 3.3 hereof; and (v) Each Pass Through Trustee shall set forth the amounts to be paid in accordance with clause "fifth" of Section 3.3 hereof. (c) At such time as a Pass Through Trustee or a Liquidity Provider shall have received all amounts owing to it (and, in the case of a Pass Through 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 the Pass Through 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 Pass Through 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; provided, however, that any transfer of funds pursuant to any instruction received after 10:00 A.M. (New York City time) on any Business Day may be made on the next succeeding Business Day. (f) In the event the Subordination Agent shall not receive from any Person any information set forth in paragraphs (a) or (b) above which is required to enable the Subordination Agent to make a distribution to such Person pursuant to Section 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 "eighth" of Section 3.2 and clauses "first" through "ninth" of Section 3.3 to the extent it shall have sufficient information to enable it to make such distributions, and shall continue to hold any funds remaining, after making such distributions, until the Subordination Agent shall receive all necessary information to enable it to distribute any funds so withheld. (g) On such dates (but not more frequently than monthly) as any Liquidity Provider or any Pass Through Trustee shall request, 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 therefor) 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 accrued and unpaid interest owed to each Liquidity Provider; third, such amount as shall be required (A) to pay or reimburse the Liquidity Providers in an amount equal to the amount of all Liquidity Obligations then due (other than amounts payable pursuant to clause "first" or "second" of this Section 3.2) shall be distributed to the Liquidity Providers, and (B) if applicable, to replenish the Cash Accounts up to their respective Required Amounts shall be deposited in the Cash Accounts, in each such case, pari passu on the basis of the amounts of such unreimbursed Liquidity Obligations and/or deficiencies; fourth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class A Pass Through Certificates on such Distribution Date shall be distributed to the Pass Through Trustee of the Class A Pass Through Trust; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class B Pass Through Certificates on such Distribution Date shall be distributed to the Pass Through Trustee of the Class B Pass Through Trust; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class C Pass Through Certificates on such Distribution Date shall be distributed to the Pass Through Trustee of the Class C Pass Through Trust; seventh, 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 Pass Through Trustee pursuant to the terms of this Agreement and the Pass Through Agreements, as the case may be, shall be distributed to the Subordination Agent and such Pass Through Trustee; and eighth, the balance, if any, of any such payment 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 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 Trust Certificates or any Trust Property, shall be applied by the Subordination Agent in reimbursement of such costs and expenses, (ii) each Pass Through Trustee for any amounts of the nature described in clause (i) above actually incurred by it under the applicable Pass Through Agreement (to the extent not previously reimbursed), shall be distributed to such Pass Through Trustee and (iii) any Liquidity Provider or Certificateholder for payments, if any, made by it to the Subordination Agent or any Pass Through Trustee in respect of amounts described in clause (i) above, shall be distributed to such Liquidity Provider or to the applicable Pass Through 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) to pay in full the outstanding amount of all Liquidity Obligations, whether or not then due (other than amounts payable pursuant to clause "second" or "third" of this Section 3.3) shall be distributed to each Liquidity Provider that has not funded a Cash Account in accordance with Section 3.6(c) or 3.6(i) hereof, and/or (B) if applicable, so long as no Performing Certificate Deficiency exists and no Liquidity Event of Default has occurred and is continuing, to replenish the Cash Accounts up to their respective Required Amounts shall be deposited in the Cash Accounts, in each case, pari passu on the basis of the amount of Liquidity Obligations owed to each Liquidity Provider and/or such deficiencies; fifth, such amount as shall be required to reimburse or pay (i) the Subordination Agent for any Tax (other than Taxes imposed on compensation paid hereunder), expense, fee, charge or other loss incurred by or any other amount payable to the Subordination Agent in connection with the transactions contemplated hereby (to the extent not previously reimbursed), shall be applied by the Subordination Agent in reimbursement of such amount, (ii) each Pass Through Trustee for any Tax (other than Taxes imposed on compensation paid under the applicable Pass Through Agreement), expense, fee, charge, loss or any other amount payable to such Pass Through Trustee under the applicable Pass Through Agreements (to the extent not previously reimbursed), shall be distributed to such Pass Through 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 Pass Through Trustee for the account of such Certificateholder, in each such case, pari passu on the basis of all amounts described in clauses (i) through (iii) above; sixth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class A Pass Through Certificates shall be distributed to the Pass Through Trustee of the Class A Pass Through Trust; seventh, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class B Pass Through Certificates shall be distributed to the Pass Through Trustee of the Class B Pass Through Trust; eighth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class C Pass Through Certificates shall be distributed to the Pass Through Trustee of the Class C Pass Through Trust; and ninth, such amount remaining shall be retained in the Collection Account until the immediately succeeding Distribution Date or, if all Classes of Certificates shall have been paid in full, shall be distributed to the Owner Trustee. SECTION 3.4 Other Payments. Any payments received by the Subordination Agent for which no provision as to the application thereof is made in this Agreement shall be distributed by the Subordination Agent in the order of priority specified in Section 3.3. SECTION 3.5 Payments to the Pass Through Trustee 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 Pass Through Trustee which shall not be the same institution as the Subordination Agent shall be paid to such Pass Through Trustee by wire transfer of funds at the address such Pass Through 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 Pass Through Certificates or the Class B Pass Through Certificates (at the Stated Interest Rate for such Class of Pass Through Certificates), then, prior to 12:00 noon (New York City time) on the Business Day following such Distribution Date, the Subordination Agent shall request a drawing (each such drawing, an "Interest Drawing") under the Liquidity Facility with respect to such Class of Pass Through Certificates in an amount equal to the lesser of (i) an amount sufficient to pay the amount of such accrued interest (at the Stated Interest Rate for such Class of Pass Through Certificates) and (ii) the Available Amount under such Liquidity Facility, and shall pay such amount to the Pass Through Trustee with respect to such Class of Pass Through 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 Account, and payable in each case to the Class A Pass Through Certificateholders, shall be promptly distributed to the Pass Through Trustee of the Class A Pass Through Trust and (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 Account, and payable in each case to the Class B Pass Through Certificateholders, shall be promptly distributed to the Pass Through Trustee of the Class B Pass Through Trust. (c) Downgrade Drawings. If at any time the debt rating of any Liquidity Provider issued by either Rating Agency is lower than the applicable Threshold Rating, within 30 days after receiving notice of such downgrading (but no later than the expiration date of the Liquidity Facility issued by the downgraded Liquidity Provider (the "Downgraded Facility")), such Liquidity Provider may arrange, or the Subordination Agent (in consultation with Federal Express Corporation) may arrange, for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility to the Subordination Agent. If a Downgraded Facility has not been replaced in accordance with the terms of this paragraph, the Subordination Agent shall, on such 30th day (or if such 30th day is not a Business Day, on the next succeeding Business Day) (or, if earlier, the expiration date of such Downgraded Facility), request a drawing in accordance with and to the extent permitted by such Downgraded Facility (such drawing, a "Downgrade Drawing") of the Available Amount 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 any Liquidity Facility with respect to any Class of Pass Through Certificates 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 such Class of Pass Through Certificates, then, no earlier than the 60th day and no later than the 40th day prior to the then Stated Expiration Date, the Subordination Agent shall request that such Liquidity Provider extend the Stated Expiration Date for a period of 364 days or more after the Stated Expiration Date (unless the obligations of such Liquidity Provider thereunder are earlier terminated in accordance with such Liquidity Facility). The Liquidity Provider shall advise the Subordination Agent, 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, such Liquidity Facility shall not have been so extended or replaced in accordance with Section 3.6(e), or if the Liquidity Provider fails irrevocably and unconditionally to advise the Subordination Agent 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 Liquidity Facility (a "Non-Extended Facility"), request a drawing under such expiring Liquidity Facility (such drawing, a "Non-Extension Drawing") of the Available Amount thereunder. Amounts drawn pursuant to any Non-Extension Drawing shall be maintained and invested in accordance with Section 3.6(f) hereof. (e) Issuance of Replacement Liquidity Facility. At any time, the Subordination Agent may, at its option, in consultation with Federal Express Corporation, arrange for a Replacement Liquidity Facility to replace the Liquidity Facility for any Class of Pass Through Certificates; provided that the initial Liquidity Provider may not be replaced unless there shall have become due to the initial Liquidity Provider amounts pursuant to Section 3.1, 3.2 or 3.3 of the Liquidity Facilities and the replacement of the initial Liquidity Provider would reduce or eliminate the obligation to pay such amounts. In any such consultation, the Subordination Agent shall accept the recommendations of Federal Express Corporation in the absence of a good faith reason not to do so. If such Replacement Liquidity Facility is provided at any time after a Downgrade Drawing or a Non-Extension Drawing has been made, all funds on deposit in the relevant Cash Account will be returned to the Liquidity Provider being replaced. No such Replacement Liquidity Facility executed in connection therewith shall become effective and no such Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative Agreements, unless and until (i) the conditions referred to in the immediately following paragraph shall have been satisfied and (ii) if such Replacement Liquidity Facility shall materially adversely affect the rights, remedies, interests or obligations of the Class A Pass Through Certificateholders or the Class B Pass Through Certificateholders under any of the Operative Agreements, the applicable Pass Through Trustee shall have consented, in writing, to the execution and issuance of such Replacement Liquidity Facility. In connection with the issuance of each Replacement Liquidity Facility, the Subordination Agent 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 the rating then in effect for any Class of Pass Through Certificates by such Rating Agency (without regard to the ratings 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 Account as described in clause (v) of Section 3.6(f) hereof and thereafter from any other available source, including, without limitation, a drawing under the Replacement Liquidity Facility, it being understood that no Replacement Liquidity Facility shall become effective (other than insofar as necessary to permit the repayment of amounts owed to the replaced Liquidity Provider) until all amounts owed to the replaced Liquidity Provider have been paid) and (z) cause the issuer of the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility to the Subordination Agent, together with a legal opinion opining that such Replacement Liquidity Facility is an enforceable obligation of such Replacement Liquidity Provider. Upon satisfaction of the conditions set forth in this Section 3.6(e), (i) the replaced Liquidity Facility shall terminate and (ii) such Replacement Liquidity Provider shall be deemed to be a Liquidity Provider with the rights and obligations of a Liquidity Provider hereunder and under the other Operative Agreements and such Replacement Liquidity Facility shall be deemed to be a Liquidity Facility hereunder and under the other Operative Agreements. (f) Cash Accounts; Withdrawals; Investments. In the event the Subordination Agent shall draw all available amounts under the Class A Liquidity Facility or the Class B Liquidity Facility pursuant to Section 3.6(c) or a Final Drawing shall be made as provided in the Liquidity Facility, amounts so drawn shall be deposited by the Subordination Agent in the Class A Cash Account or the Class B Cash Account, respectively. Amounts so deposited shall be invested in Specified Investments in accordance with Section 2.2(b) hereof. Investment Earnings on amounts on deposit in the Cash Accounts as a result of any drawings under Section 3.6(c) hereof (other than to the extent such drawing becomes a Final Drawing) shall be paid to the respective Liquidity Provider entitled thereto prior to giving effect to the distributions below on each Distribution Date commencing on the first Distribution Date after any such drawing. Investment Earnings on amounts on deposit in the Cash Accounts as a result of any drawings under Section 3.6(i) hereof (and amounts which become a Final Drawing) shall be deposited in the Collection Account. The Subordination Agent shall deliver a written statement to the recipient Liquidity Provider one day prior to each Distribution Date setting forth the aggregate amount of Investment Earnings held in the Cash 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 on the Class A Pass Through Certificates (at the Stated Interest Rate for the Class A Pass Through Certificates) from any other source, withdraw from the Class A Cash Account and pay to the Pass Through Trustee of the Class A Pass Through Trust 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 Pass Through Certificates) on such Class A Pass Through Certificates and (y) the amount on deposit in the Class A Cash Account; (ii) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class B Pass Through Certificates (at the Stated Interest Rate for the Class B Pass Through Certificates) from any other source, withdraw from the Class B Cash Account, and pay to the Pass Through Trustee of the Class B Pass Through Trust 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 Pass Through Certificates) on such Class B Pass Through Certificates and (y) the amount on deposit in the Class B Cash Account; (iii) on each date on which the Pool Balance of the Class A Pass Through Trust shall have been reduced by payments made to the Class A Pass Through Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall withdraw from the Class A Cash 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 Account on such date), the Required Amount (with respect to the Class A Liquidity Facility) will be on deposit in the Class A Cash Account and shall first, pay such amount to the Class A Liquidity Provider until the Liquidity Obligations (with respect to the Class A Pass Through Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (iv) on each date on which the Pool Balance of the Class B Pass Through Trust shall have been reduced by payments made to the Class B Pass Through Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall withdraw from the Class B Cash 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 Account on such date), the Required Amount (with respect to the Class B Liquidity Facility) will be on deposit in the Class B Cash Account and shall first, pay such amount to the Class B Liquidity Provider until the Liquidity Obligations (with respect to the Class B Pass Through Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (v) if a Replacement Liquidity Facility for any Class of Pass Through Certificates shall be delivered to the Subordination Agent following the date on which funds have been deposited into the Cash Account for such Class of Pass Through Certificates, the Subordination Agent shall withdraw all amounts on deposit in such Cash 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 (vi) following the payment of Final Distributions with respect to any Class of Pass Through Certificates, on the date on which the Subordination Agent shall have been notified by the Liquidity Provider for such Class of Pass Through 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 Account in respect of such Class of Pass Through Certificates and shall deposit such amount in the Collection Account. (g) Reinstatement. With respect to any Interest Drawing under the Liquidity Facility for any Pass Through 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 so reimbursed to the applicable Liquidity Provider but not to exceed the Required Amount for 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 (i) a Triggering Event shall have occurred and (ii) a Performing Certificate Deficiency exists or (y) a Liquidity Event of Default shall have occurred and be continuing under such Liquidity Facility. In the event that at any time prior to both the occurrence of a Triggering Event and the existence of a Performing Certificate Deficiency funds are withdrawn from any Cash Account pursuant to clauses (i), (ii) or (iii) of Section 3.6(f) hereof, then funds received by the Subordination Agent prior to both the occurrence of a Triggering Event and the existence of a Performing Certificate Deficiency shall be deposited in such Cash Account as 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. If any action is required under a Liquidity Facility to be taken by the Subordination Agent in order to make a Final Drawing thereunder, the Subordination Agent shall not fail to take such action. Upon receipt of the proceeds of a Final Drawing under the related Liquidity Facility, the Subordination Agent shall maintain and invest such proceeds in accordance with Section 3.6(f) hereof. (j) Reduction of Stated Amount. Promptly following each date on which the Required Amount of the Liquidity Facility for a Class of Pass Through Certificates is reduced as a result of a distribution to the Certificateholders of such Class of Pass Through Certificates, the Subordination Agent shall, if such Liquidity Facility provides for reductions of the Stated Amount of such Liquidity Facility and if such reductions are not automatic, request the Liquidity Provider for such Class of Pass Through Certificates to reduce such Stated Amount to an amount equal to the Required Amount with respect to such Liquidity Facility (as calculated by the Subordination Agent after giving effect to such payment). Each such request shall be made in accordance with the provisions of the applicable Liquidity Facility. (k) Relation to Subordination Provisions. Interest Drawings under the Liquidity Facilities and withdrawals from the Cash Accounts, in each case, in respect of interest on the Pass Through Certificates of any Class, will be distributed to the Pass Through Trustee for such Class of Pass Through Certificates, notwithstanding Sections 3.2, 3.3 and 3.6(h) hereof. SECTION 3.7. Preference Payments. (a) In the event that (i) any portion of any payment to the Subordination Agent, a Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment shall have been avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, such Pass Through Trustee or such holder of any Pass Through Certificate becomes liable for such portion, or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, such Pass Through Trustee or any holder of such Pass Through Certificate could become liable for such portion, the Subordination Agent shall: (A), upon the occurrence of an event described in foregoing clause (i), request a drawing under the Letter of Credit in an amount equal to the lesser of (x) such portion and (y) the maximum amount available under the Letter of Credit, and, notwithstanding any other provision hereof to the contrary, pay such amount to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate in payment of such portion; or (B), upon the occurrence of an event described in foregoing clause (ii), withdraw the maximum amount available under the Letter of Credit (the "Clause B Proceeds") and deposit such proceeds in the Escrow Account as provided in Section 3.7(b). (b) Upon receipt of Clause B Proceeds by the Subordination Agent, the Subordination Agent shall establish and maintain in its name, and deposit the Clause B Proceeds in, an account (the "Escrow Account") bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Subordination Agent, the Pass Through Trustee and any holder of any Pass Through Certificate. The Subordination Agent shall invest and reinvest funds on deposit in the Escrow Account in Specified Investments selected by the Subordination Agent if such investments are reasonably available and have maturities no later than 90 days following the date of such investment. All investment earnings or losses on funds on deposit in the Escrow Account shall be added to or subtracted from the Escrow Account. (c) If the Clause B Proceeds have been deposited in the Escrow Account, then, upon the occurrence of an event described in clause (i) of Section 3.7(a), the Subordination Agent shall withdraw from the Escrow Account an amount equal to the lesser of (x) such portion so avoided and (y) the amount then in the Escrow Account, and notwithstanding any other provision hereof to the contrary, pay such amount to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate in payment of such portion; provided, that if any unmatured Specified Investment is then in the Escrow Account, withdrawal shall be delayed until the maturity of such Specified Investment, and thereupon the proceeds thereof shall be withdrawn and paid as, and to the extent, aforesaid. (d) Upon receipt by the Subordination Agent of an order from a court of competent jurisdiction that confirms (i) a plan of reorganization of the Lessee or (ii) liquidation of the Lessee, the Subordination Agent shall withdraw from the Escrow Account and deposit in the Collection Account all amounts then in the Escrow Account; provided, that if any unmatured Specified Investment is then in the Escrow Account, withdrawal shall be delayed until the maturity of such Specified Investment, and thereupon the proceeds thereof shall withdrawn and paid as aforesaid. (e) For purposes of this Section 3.7, (i) "Certificate Holder," "Lessee" and "Specified Shortfall Payment" shall have the meanings set forth in the Participation Agreement relating to any Indenture, (ii) "Bankruptcy Code" shall mean the U.S. Bankruptcy Reform Act of 1978, as amended from time to time, and (iii) "Letter of Credit" shall mean the Irrevocable Letter of Credit No. 0815 of Kreditanstalt fur Wiederaufbau in favor of the Subordination Agent. 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 Event of Default under any Indenture, the Controlling Party shall direct the Indenture Trustee under such Indenture in the exercise of remedies available to the holders of the Equipment Trust Certificates issued pursuant to such Indenture, including, without limitation, the ability to vote all such Equipment Trust Certificates in favor of declaring all of the unpaid principal amount of such Equipment Trust Certificates and accrued interest thereon to be due and payable under, and in accordance with, the provisions of such Indenture. Subject to the Owner Trustees' and the Owner Participants' rights set forth in the Indentures to purchase the Equipment Trust Certificates, if the Equipment Trust Certificates issued pursuant to any Indenture have been Accelerated following an Indenture Event of Default with respect thereto, the Controlling Party may sell, assign, contract to sell or otherwise dispose of and deliver all (but not less than all) of such Equipment Trust Certificates to any Person at public or private sale, at any location at the option of the Controlling Party, all upon such terms and conditions as it may reasonably deem advisable in accordance with applicable law. (ii) Subject to the Owner Trustees' and the Owner Participants' rights set forth in the Indentures to purchase the Equipment Trust Certificates, and notwithstanding the foregoing, so long as any Pass Through Certificates remain Outstanding, during the period ending on the date which is nine months after the earlier of (x) the Acceleration of the Equipment Trust Certificates issued pursuant to any Indenture or (y) the occurrence of a Federal Express Corporation Bankruptcy Event, without the consent of the Pass Through Trustee, (A) no Aircraft subject to the Lien of such Indenture or such Equipment Trust Certificates may be sold if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Trust Certificates and (B) the amount and payment dates of rentals payable by Federal Express Corporation 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 Federal Express Corporation under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Trust Certificates 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 Event of Default (and before the occurrence of a Triggering Event) commission LTV Appraisals with respect to the related Aircraft. (iv) After a Triggering Event occurs and any Equipment Trust Certificates becomes a Non-Performing Equipment Trust Certificates, the Subordination Agent shall obtain LTV Appraisals for the Aircraft as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in any such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). (b) The Controlling Party shall take such actions as it may reasonably deem most effectual to complete the sale or other disposition of such Aircraft or Equipment Trust Certificates. In addition, in lieu of any sale, assignment, contract to sell or other disposition, the Subordination Agent, on behalf of the Controlling Party, may maintain possession of such Equipment Trust Certificates and continue to apply monies received in respect of such Equipment Trust Certificates in accordance with Article III hereof. In addition, in lieu of such sale, assignment, contract to sell or other disposition, or in lieu of such maintenance of possession, the Controlling Party may instruct the Indenture Trustee under such Indenture to foreclose on the Lien on the related Aircraft or to take any other remedial action permitted under such Indenture or applicable law. SECTION 4.2 Remedies Cumulative. Each and every right, power and remedy given to the Pass Through Trustees, 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 Pass Through Trustee, the Controlling Party or the Subordination Agent, as appropriate, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by any Pass Through Trustee, the Controlling Party or the Subordination Agent in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default or to be an acquiescence therein. SECTION 4.3 Discontinuance of Proceedings. In case any party to this Agreement (including the Controlling Party in such capacity) shall have instituted any Proceeding to enforce any right, power or remedy under this Agreement by foreclosure, entry or otherwise, and such Proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Person instituting such Proceeding, then and in every such case each such party shall, subject to any determination in such proceedings, be restored to its former position and rights hereunder, and all rights, remedies and powers of such party shall continue as if no such Proceeding had been instituted. SECTION 4.4 Right of Certificateholders and Liquidity Providers to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding but subject to each Pass Through Agreement, the right of any Certificateholder or any Liquidity Provider, respectively, to receive payments pursuant to Section 2.4, 3.2 or 3.3 hereof when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date, shall not be impaired or affected without the consent of such Certificateholder or such Liquidity Provider, respectively. SECTION 4.5 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement or in any suit against any Controlling Party or the Subordination Agent for any action taken or omitted by it as Controlling Party or Subordination Agent, as the case may be, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the 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 Pass Through Trustee or a suit by Certificateholders holding more than 10% of the original principal amount of any Class of Pass Through Certificates. ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF THE PASS THROUGH TRUSTEE, ETC. SECTION 5.1 Notice of Indenture Event of Default or Triggering Event. (a) In the event the Subordination Agent shall have actual knowledge of the occurrence of an Indenture Event of Default or a Triggering Event, as promptly as practicable, and in any event within 10 days after obtaining knowledge thereof, the Subordination Agent shall transmit by mail to the Rating Agencies, the Liquidity Providers and the Pass Through Trustees notice of such Indenture Event of Default or Triggering Event, unless such Indenture Event of 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 Event of Default or Triggering Event unless notified in writing by one or more Pass Through Trustees, one or more Liquidity Providers or one or more Certificateholders. (b) Other Notices. The Subordination Agent will furnish to each Liquidity Provider and each Pass Through 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 Trust Certificates 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 such Pass Through 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 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 the Pass Through Trustee. If a Responsible Officer of any Liquidity Provider or any Pass Through Trustee has notice of an Indenture Event of Default or a Triggering Event, such Person shall promptly give notice thereof to all other Liquidity Providers and Pass Through 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 Pass Through Trustee for the Class A and Class B Pass Through Trusts hereby designates and appoints the Subordination Agent as the agent and trustee of such Pass Through Trustee under the applicable Liquidity Facility and authorizes the Subordination Agent to enter into the applicable Liquidity Facility as agent and trustee for such Pass Through Trustee. Each of the Liquidity Providers and the Pass Through Trustees hereby designates and appoints the Subordination Agent as the Subordination Agent under this Agreement. First Security Bank, National Association, 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 negligence, (b) as provided in Section 2.2 hereof and (c) for liabilities that may result from the 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 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 Pass Through 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 Pass Through Trustee or any Liquidity Provider as provided in Articles II and III hereof need not be segregated in any manner except to the extent required by such Articles II and III and by law, and the Subordination Agent shall not (except as otherwise provided in Section 2.2 hereof) be liable for any interest thereon; provided, however, that any payments received or applied hereunder by the Subordination Agent shall be accounted for by the Subordination Agent so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.5 Reliance; Agents; Advice of Counsel. The Subordination Agent shall not incur liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. As to the Pool Balance of any Pass Through 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 Pass Through 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 Pass Through 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 Pass Through 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 Pass Through 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 the Pass Through Trustee 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. 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 Pass Through Trustee or Liquidity Provider for any fee as compensation for its services as agent under this Agreement. The provisions of this Section 6.7 shall survive the termination of this Agreement. SECTION 6.8 May Become Certificateholder. The institution acting as Subordination Agent hereunder may become a Certificateholder and have all rights and benefits of a Certificateholder to the same extent as if it were not the institution acting as the Subordination Agent. SECTION 6.9 Subordination Agent Required; Eligibility. There shall at all times be a Subordination Agent hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State thereof or of the District of Columbia having a combined capital and surplus of at least $100,000,000 (or the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any State thereof or of the District of Columbia and having a combined capital and surplus of at least $100,000,000), if there is such an institution willing and able to perform the duties of the Subordination Agent hereunder upon reasonable or customary terms. Such corporation shall be a citizen of the United States and shall be authorized under the laws of the United States or any State thereof or of the District of Columbia to exercise corporate trust powers and shall be subject to supervision or 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 Trust Certificates, 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 Trust Certificates, monies and other property. All such Equipment Trust Certificates, monies or other property 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 Articles 8 and 9 of the Participation Agreements. The indemnities contained in such Articles 8 and 9 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 Pass Through Trustees and the Liquidity Providers. The Liquidity Provider or the Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred) may remove the Subordination Agent for cause by so notifying the Subordination Agent and may appoint a successor Subordination Agent. The Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred) shall remove the Subordination Agent if: (1) the Subordination Agent fails to comply with Section 6.9 hereof; (2) the Subordination Agent is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Subordination Agent or its property; or (4) the Subordination Agent otherwise becomes incapable of acting. If the Subordination Agent resigns or is removed or if a vacancy exists in the office of Subordination Agent for any reason (the Subordination Agent in such event being referred to herein as the retiring Subordination Agent), the Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred), in consultation with Federal Express Corporation, shall promptly appoint a successor Subordination Agent. Any corporation into which the Subordination Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Subordination Agent shall be a party, or any corporation to which substantially all the corporate trust business of the Subordination Agent may be transferred, shall, subject to the terms of Section 6.9 hereof, be the Subordination Agent hereunder and under the other Operative Agreements to which the Subordination Agent is a party without further act, except that such Person shall give prompt subsequent notice of such transaction to the Liquidity Provider and each Pass Through Trustee. A successor Subordination Agent shall deliver a written acceptance of its appointment as Subordination Agent hereunder to the retiring Subordination Agent, upon which the resignation or removal of the retiring Subordination Agent shall become effective, and the successor Subordination Agent shall have all the rights, powers and duties of the Subordination Agent under this Agreement. The successor Subordination Agent shall send a written notice of its succession to the Liquidity Providers and the Pass Through 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 either one or more of the Pass Through Trustees or Federal Express Corporation 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 Pass Through Trustees, one or more of the Liquidity Providers or Federal Express Corporation 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 Pass Through Trustee (acting with the consent of holders of Pass Through Certificates of the related Class evidencing interests in the related Pass Through Trust aggregating not less than a majority in interest in such Trust), the Subordination Agent and each Liquidity Provider; provided, however, that this Agreement may be supplemented, amended or modified without the consent of any Pass Through Trustee (i) if such supplement or amendment cures an ambiguity or inconsistency or does not materially adversely affect such Pass Through Trustee or the holders of the related Class of Pass Through Certificates or (ii) to provide for a Non-Extension Drawing under a Replacement Liquidity Facility which is scheduled to expire prior to the date which is 15 days after the Final Legal Distribution Date and for the deposit of such Non-Extension Drawing in the Class A Cash Account provided, in the case of this clause (ii), that the Subordination Agent shall have received a Ratings Confirmation after giving effect to such amendment or modification. Notwithstanding the foregoing, without the consent of each Certificateholder and each Liquidity Provider, no supplement, amendment or modification of this Agreement may (i) reduce the percentage of the interest in any Pass Through Trust evidenced by the Pass Through Certificates issued by such Pass Through Trust necessary to consent to modify or amend any provision of this Agreement or to waive compliance therewith or (ii) modify Section 2.4, 3.2 or 3.3 hereof, relating to the distribution of monies received by the Subordination Agent hereunder from the Equipment Trust Certificates or pursuant to the Liquidity Facilities. Nothing contained in this Section shall require the consent of a Pass Through Trustee at any time following the payment of Final Distributions with respect to the related Class of Pass Through Certificates. (b) In the event that the Subordination Agent, as the registered holder of any Equipment Trust Certificates, receives a request for its consent to any amendment, modification or waiver under such Equipment Trust Certificates, the Indenture pursuant to which such Equipment Trust Certificates were issued, or the Lease, Participation Agreement or other related document, (i) if no Indenture Event of Default shall have occurred and be continuing, the Subordination Agent shall request instructions with respect to each Series of Equipment Trust Certificates from the Pass Through Trustee of the Pass Through Trust which holds such Equipment Trust Certificates and shall vote or consent in accordance with the instructions of such Pass Through Trustee and (ii) if any Indenture Event of Default (which has not been cured by the applicable Owner Trustee or the applicable Owner Participant 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; 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 Federal Express Corporation under the Lease; and provided further that no amendment of or supplement to any Indenture, any Lease or any Participation Agreement or waiver or modification of the terms of, or consent under, any thereof, shall, without the consent of each Liquidity Provider, have any of the effects listed in the provisos to Section 7.11 or 13.02 or Section 8.01(c) of the Indenture. SECTION 9.2 Subordination Agent Protected. If, in the reasonable opinion of the institution acting as the Subordination Agent hereunder, any document required to be executed pursuant to the terms of Section 9.1 affects any right, duty, immunity or indemnity with respect to it under this Agreement or any Liquidity Facility, the Subordination Agent may in its discretion decline to execute such document. SECTION 9.3 Effect of Supplemental Agreements. Upon the execution of any amendment or supplement hereto pursuant to the provisions hereof, this Agreement shall be and be deemed to 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 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 Pass Through 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 Pass Through Trustees, the Liquidity Providers and the Subordination Agent hereunder or under the Pass Through Agreements, and that the commitment of the Liquidity Providers under the Liquidity Facilities shall have expired or been terminated, this Agreement and the trusts created hereby shall terminate and this Agreement shall be of no further force or effect. Except as aforesaid or otherwise provided, this Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 10.2 Intercreditor Agreement for Benefit of the Pass Through Trustees, Liquidity Providers and Subordination Agent. Nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the Pass Through 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 Federal Express Corporation courier service, or by confirmed telecopy and (i) if to the Subordination Agent, addressed to at its office at: First Security Bank, National Association 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Services (ii) if to any Pass Through Trustee, addressed to it at its office at: First Security Bank, National Association 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Services (iii) if to any Liquidity Provider, addressed to it at its office at: KREDITANSTALT FUR WIEDERAUFBAU Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Attention: Head of Aircraft Finance Department K111b3 Telecopy: 011-49-69-7431-2944 Whenever any notice in writing is required to be given by any Pass Through 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, if such notice is mailed by certified mail, postage prepaid or by Federal Express Corporation courier service or is sent by confirmed telecopy addressed as provided above. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this 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. 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 Pass Through 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 Trust Certificates 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 Pass Through 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 Pass Through Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent confirm that the payment priorities specified in Sections 2.4, 3.2 and 3.3 shall apply in all circumstances, notwithstanding the fact that the obligations owed to the Pass Through Trustees and the holders of Certificates are secured by certain assets and the Liquidity Obligations are not so secured. The Pass Through 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 Pass Through Trustees (on behalf of itself 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 Pass Through 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 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 proceedings may be brought in such courts, and waives any objection that it may now or hereafter have that the venue of any 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) Each 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. 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. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Pass Through Trustee By ------------------------------------ Name: Title: KREDITANSTALT FUR WIEDERAUFBAU, as Class A Liquidity Provider and Class B Liquidity Provider By ------------------------------------ Name: Title: By ------------------------------------ Name: Title: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and trustee By ------------------------------------ Name: Title: SCHEDULE 1 TO INTERCREDITOR AGREEMENT ----------------------- Indentures ---------- Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, and First Security Bank, National Association, as Indenture Trustee SCHEDULE 2 TO INTERCREDITOR AGREEMENT ----------------------- Participation Agreements ------------------------ Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, amended and restated as of June 15, 1998, as amended and restated as of June 15, 1998, among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent EX-4.A5 5 EXHIBIT 4.a.5 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS A PASS THROUGH CERTIFICATES Dated as of June 15, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Subordination Agent, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, as Borrower and KREDITANSTALT FUR WIEDERAUFBAU as Liquidity Provider Relating to Federal Express Corporation 1998-1-A Pass Through Trust 6.72% Federal Express Corporation Pass Through Certificates, Series 1998-1 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........................................... 7 Section 2.02 Making the Advances.................................... 7 Section 2.03 Fees................................................... 9 Section 2.04 Reduction or Termination of the Commitment............. 9 Section 2.05 Repayments of Interest Advances or the Final Advance... 9 Section 2.06 Repayments of Downgrade Advances....................... 10 Section 2.07 Payments to the Liquidity Provider Under the Intercreditor Agreement................................ 11 Section 2.08 Book Entries........................................... 11 Section 2.09 Payments from Available Funds Only..................... 11 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01 Increased Costs........................................ 12 Section 3.02 Capital Adequacy....................................... 13 Section 3.03 Payments Free of Deductions............................ 13 Section 3.04 Payments............................................... 14 Section 3.05 Computations........................................... 14 Section 3.06 Payment on Non-Business Days........................... 14 Section 3.07 Interest............................................... 15 Section 3.08 Replacement of Borrower................................ 16 Section 3.09 Funding Loss Indemnification........................... 16 Section 3.10 Illegality............................................. 16 ARTICLE IV CONDITIONS PRECEDENT Section 4.01 Conditions Precedent to Effectiveness of Section 2.01........................................... 17 Section 4.02 Conditions Precedent to Borrowing...................... 19 ARTICLE V COVENANTS Section 5.01 Affirmative Covenants of the Borrower.................. 20 Section 5.02 Negative Covenants of the Borrower..................... 20 ARTICLE VI FINAL ADVANCE Section 6.01 Final Advance.......................................... 21 ARTICLE VII MISCELLANEOUS Section 7.01 Amendments, Etc........................................ 21 Section 7.02 Notices, Etc........................................... 21 Section 7.03 No Waiver; Remedies.................................... 22 Section 7.04 Further Assurances..................................... 22 Section 7.05 Indemnification; Survival of Certain Provisions........ 22 Section 7.06 Liability of the Liquidity Provider.................... 23 Section 7.07 Costs, Expenses and Taxes.............................. 23 Section 7.08 Binding Effect; Participations......................... 24 Section 7.09 Severability........................................... 24 Section 7.10 GOVERNING LAW.......................................... 25 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial....... 25 Section 7.12 Execution in Counterparts.............................. 27 Section 7.13 Entirety............................................... 27 Section 7.14 Headings; Section References........................... 27 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES....... 27 ANNEX I - Interest Advance Notice of Borrowing ANNEX II - Downgrade Advance Notice of Borrowing ANNEX III - Notice of Replacement Borrower ANNEX IV - Notice of Automatic Reduction of Commitment IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS A PASS THROUGH CERTIFICATES IRREVOCABLE REVOLVING CREDIT AGREEMENT, CLASS A PASS THROUGH CERTIFICATES dated as of June 15, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class A Pass Through Trust (as defined below) (the "Borrower"), and KREDITANSTALT FUR WIEDERAUFBAU, a corporation organized under the public law of the Republic of Germany ("KfW" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class A Supplement (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 Pass Through Trust is issuing the Class A Pass Through Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class A Pass Through 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: "Advance" means an Interest Advance, a Final Advance, a Downgrade Advance or an Applied Downgrade Advance. "Applicable Liquidity Rate" means the rates of interest specified in Section 3.07(g) with respect to any Advance or any other amount. "Applicable Margin" means, with respect to any Advance, 1.25% (125 basis points) per annum. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.06(a). "Available Commitment" means, at any time of determination, an amount equal to (i) the Commitment at such time less (ii) subject to the third sentence of Section 2.02(a), the aggregate amount of each Advance outstanding at such time; provided that following a Downgrade Advance or a Final Advance, the Available Commitment shall be zero. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to (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 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 1 percent (0.25%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing or pursuant to Section 6.01. "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 Memphis, Tennessee, New York, New York, Frankfurt, Germany or, so long as any Class A Pass Through Certificates are outstanding, the city and state in which the Pass Through Trustee of the Class A Pass Through Trust 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 based on the LIBOR Rate, on which dealings in U.S. dollars are carried on in the London interbank market (a "London Business Day"); provided, however, that if the day in question relates to the effectiveness of the LIBOR Rate, Business Day shall mean a London Business Day on which commercial banks are not required or authorized to close in New York, New York. "Calculation Agent" means the Liquidity Provider. "Commitment" means, initially, $46,858,223, as the same may be reduced from time to time in accordance with Section 2.04(a). "Downgrade Advance" means an Advance made pursuant to Section 2.02(b). "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. "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 30, 2023. "Final Advance" means an Advance made pursuant to Sections 2.02(c) and 6.01. "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Pass Through Trustee, 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 date such LIBOR Advance is made (or is converted from a Base Rate Advance) and ending on the next Regular Distribution Date; and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date; provided, however, that 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 making of such Final Advance (in the cause of clause (x) above) or the Regular Distribution Date following such conversion (in the case of clause (y) above). "Lending Office" means the lending office of the Liquidity Provider, presently located at Frankfurt, Germany, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or London, England. "LIBOR Rate" means, with respect to any Interest Period, the interest rate per annum (calculated on the basis of a 360-day year and actual days elapsed) at which deposits in United States dollars are offered to prime banks in the London interbank market as indicated on display page 3750 (British Bankers Association-LIBOR) of the Dow Jones Markets Service (or such other page as may replace such display page 3750 for the purpose of displaying London interbank offered rates for United States dollar deposits) or, if not so indicated, the average (rounded upwards to the nearest 1/100%), as determined by the Calculation Agent, of such rates as indicated on the Reuters Screen LIBO Page (or such other page as may replace such Reuters Screen LIBO Page for the purpose of displaying London interbank offered rates for United States dollar deposits) or, if neither such alternative is indicated, the average (rounded upwards to the nearest 1/100%), as determined by the Calculation Agent, of such rates offered by the London Reference Banks to prime banks in the London interbank market, in each case at or about 11:00 a.m. (London time) on the day two LIBOR Business Days prior to the first day of such Interest Period for deposits of a duration equal to such Interest Period (or such other period most nearly corresponding to such period) in an amount substantially equal to the principal amount of the applicable LIBOR Advance as of the first day of such Interest Period. The Calculation Agent will, if necessary, request that each of the London Reference Banks provide a quotation of its rate. If at least two such quotations are provided, the rate will be the average of the quotations (rounded upwards to the nearest 1/100%). If no such quotation can be obtained, the rate will be LIBOR for the immediately preceding Interest Period. "Liquidity Event of Default" means the occurrence of the following: all of the Equipment Trust Certificates shall have been either declared to be immediately due and payable or shall not have been paid at their final maturity. Notwithstanding the foregoing, a Liquidity Event of Default shall not occur upon an automatic acceleration of the Equipment Trust Certificates as a result of a Federal Express Corporation Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) each affiliate of the Liquidity Provider, (iii) the respective directors, officers, employees, agents and servants of the Liquidity Provider and its affiliates, and (iv) the successors and permitted assigns of the persons described in clauses (i) through (iii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "London Reference Banks" means the principal London offices of National Westminster Bank Plc, Barclays Bank Plc and Bayrische Landesbank Girozentrale, or such other bank or banks as may from time to time be agreed to by Federal Express Corporation and the Calculation Agent. "Non-Excluded Tax" has the meaning specified in Section 3.03. "Notice of Borrowing" has the meaning specified in Section 2.02(d). "Notice of Replacement Borrower" has the meaning specified in Section 3.08. "Participant" has the meaning assigned to such term in Section 7.08(b). "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Trust Certificates are Performing Equipment Trust Certificates. "Prospectus" means the basic prospectus included in the registration statement on Form S-3 (File No. 333-49411) filed by Federal Express Corporation relating to certain pass through certificates, as supplemented by the prospectus supplement dated June 30, 1998 reflecting the terms of the Pass Through Certificates, as such Prospectus may be amended or supplemented. "Related Indemnitee" means, with respect to any Liquidity Indemnitee, its director, officer, employee, agent, affiliate or employer. "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 Pass Through Certificates, that would be payable on the Class A Pass Through 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 Pass Through Certificates on such day and without regard to expected future payments of principal on the Class A Pass Through Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class A Pass Through Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Pass Through Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the date on which the Liquidity Provider makes the Final Advance; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Unpaid Advance" has the meaning assigned to such term in Section 2.05. (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: "Class A Cash Account", "Class A Pass Through Certificateholders", "Class A Pass Through Certificates", "Class A Pass Through Trust", "Class A Supplement", "Class B Pass Through Certificates", "Class C Pass Through Certificates", "Closing Date", "Controlling Party", "Corporate Trust Office", "Distribution Date", "Equipment Trust Certificates", "Federal Express Corporation", "Federal Express Corporation Bankruptcy Event", "Indenture", "Investment Earnings", "Liquidity Facility", "Moody's", "Operative Agreements", "Participation Agreements", "Pass Through Agreement", "Pass Through Certificate", "Pass Through Trustee", "Performing Equipment Trust Certificates", "Person", "Pool Balance", "Rating Agency", "Regular Distribution Dates", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Triggering Event", "Underwriters", "Underwriting Agreement" 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 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 Available Commitment at such time and shall be used solely for the payment when due of interest on the Class A Pass Through Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.02(a), together with accrued interest thereon (as provided herein), the Available Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Available Commitment shall not be so reinstated at any time if (i) both (x) a Triggering Event shall have occurred and be continuing and (y) a Performing Note Deficiency exists or (ii) a Liquidity Event of Default shall have occurred and be continuing. (b) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the rating of the Liquidity Provider resulting in the Liquidity Provider's ratings not meeting the Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement), unless a Replacement Liquidity Facility shall have been delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Available Commitment at such time, and shall be used to fund the Class A Cash Account in accordance with said Section 3.6(c). (c) A Final Advance shall be made by the Liquidity Provider without the necessity for a Notice of Borrowing at the option of the Liquidity Provider on the occurrence of an event described in Section 6.01(a) or 6.01(b) in an amount equal to the Available Commitment at such time, and shall be used to fund the Class A Cash Account. (d) Each Borrowing (other than the making of a Final Advance) shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.02(a) or 2.02(b), as the case may be, given not later than 12:00 Noon (New York City time) on the second Business Day prior to the day of the proposed Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the date of such Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the third Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (e) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other person (including the holder of any Class A Pass Through Certificates or the Pass Through Trustee of the Class A Pass Through Trust) who makes to the Pass Through Trustee of the Class A Pass Through Trust or the Borrower a demand for payment with respect to any Class A Pass Through Certificates. 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. (a) The Borrower agrees to pay to the Liquidity Provider a fee equal to 0.25% of the Commitment (as in effect on the Effective Date). Such fee shall be payable on the Effective Date. (b) The Borrower shall pay, or shall cause to be paid, to the Liquidity Provider, a fee equal to 0.25% per annum on the average Available Commitment from the Effective Date to the earlier of the date on which a Downgrade Advance is made and the date on which the Commitment terminates. Such fee shall be payable in arrears on each Regular Distribution Date. Nothing contained in this Section 2.03(b) shall require the Borrower to pay any amount under this Section 2.03(b) other than to the extent the Borrower shall have funds available therefor. Section 2.04 Reduction or Termination of the Commitment. (a) Automatic Reductions. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class A Pass Through Certificates or otherwise, the Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Commitment (substantially in the form of Annex IV hereto) to the Liquidity Provider (with a copy to Federal Express Corporation) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Commitment. (b) Termination. Upon the making of any Downgrade Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.05 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.07 and 2.09, the Borrower hereby agrees to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Interest Advance or the Final Advance (any such Interest Advance or the Final Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.07. Subject to Sections 2.06, 2.07 and 2.09, unless otherwise waived by the Liquidity Provider, the Borrower shall be obligated, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to repay the Liquidity Provider for all Interest Advances and Final Advances on the same day as made and all Applied Downgrade Advances on the same day they become Applied Downgrade Advances in accordance with Section 2.06 hereof. The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and the Final Advance on the date such Interest Advance or the Final Advance is made and each Applied Downgrade Advance on the date it becomes an Applied Downgrade Advance is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.06 Repayments of Downgrade Advances. (a) Amounts advanced hereunder in respect of a Downgrade Advance shall be deposited in the Class A Cash Account, and invested and withdrawn from the Class A Cash Account, as set forth in Sections 3.6(c), (e) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Downgrade Advance, interest on the principal amount of any such Downgrade Advance as provided in Section 3.07; provided, however, that (i) any distribution to the Liquidity Provider of Investment Earnings pursuant to Section 3.6(f) of the Intercreditor Agreement shall constitute a payment of interest on such Downgrade Advance in the amount of such Investment Earnings (not to exceed the amount specified in Section 3.07) and (ii) amounts in respect of a Downgrade Advance withdrawn from the Class A Cash Account for the purpose of paying interest on the Class A Pass Through Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being an "Applied Downgrade Advance") shall be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Immediately upon the withdrawal of any amounts from the Class A Cash Account on account of a reduction in the Required Amount, the Borrower shall repay the Downgrade Advances in a principal amount equal to the amount of such reduction, plus interest on the principal amount repaid as provided in Section 3.07. (b) At any time when an Applied Downgrade Advance (or any portion thereof) is outstanding, upon the deposit in the Class A Cash Account of any amount pursuant to clause "third" of Section 2.4(b), clause "third" of Section 3.2 or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Downgrade Advances shall be automatically reduced by the amount of such Replenishment Amount and (ii) the principal amount of the outstanding Downgrade Advance 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, and prior to the effectiveness of any Replacement Liquidity Facility, the Borrower agrees that all amounts owing to the Liquidity Provider shall be repaid in full, whether from advances made by the Replacement Liquidity Provider, from amounts remaining on deposit in the Class A Cash Account after giving effect to any application of funds therefrom to any payment of interest on the Class A Pass Through Certificates on the date of such replacement, or otherwise. 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 in the order of priority required by the applicable provisions of Articles II and III of the Intercreditor Agreement. 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 amounts received by it that constitute Scheduled Payments or Special Payments or amounts payable to it under Article 8, 9 or 10 of any Participation 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 Account shall be available to make payments only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01 Increased Costs. If the Liquidity Provider shall determine that (a) any change after the date hereof in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof or in the compliance by the Liquidity Provider (or its head office) with any applicable direction, request or requirement (whether or not having the force of law) of any central bank or competent governmental or other authority shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans made by, the Liquidity Provider, or (ii) impose on the Liquidity Provider any other condition regarding this Agreement or any Advance, or (iii) change the basis of taxation of any amounts payable to the Liquidity Provider (other than Taxes imposed on the overall net or gross income of the Liquidity Provider) and (b) the result of any event referred to in the preceding clause (i), (ii) or (iii) shall be to increase the cost to the Liquidity Provider of issuing or maintaining its commitment or funding or maintaining Advances (which increase in cost shall be determined by the Liquidity Provider's reasonable allocations of the aggregate of such cost increases resulting from such event), or to reduce the amount of any sum received or receivable by the Liquidity Provider under this Agreement with respect thereto, then, upon demand by the Liquidity Provider (such demand to be made not later than 60 days after a Responsible Officer of the Liquidity Provider obtains actual knowledge of any event referred to in clause (i), (ii) or (iii) above), the Borrower shall pay, or cause to be paid, to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such increased cost or reduction; provided that if such demand for payment is made after such 60-day period, the Borrower shall be obligated to pay such additional amounts only with respect to such increased cost or reduction actually incurred or effected on or after the 60th day prior to the date of such demand. A certificate as to such increased cost or reduction (which shall set forth the basis for such increased cost or reduction) incurred by the Liquidity Provider as a result of any event mentioned in clause (i), (ii) and (iii) above, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.01 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.02 Capital Adequacy. If the Liquidity Provider shall determine that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, 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 head office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in each case after the date hereof, has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, upon demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such reduction in respect of issuing or maintaining its commitment hereunder or its funding or maintaining Advances. A certificate as to such additional amount describing the event which has the effect of reducing the rate of return on the Liquidity Provider's capital, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.02 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.03 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 any Taxes imposed on the overall net income of the Liquidity Provider and excluding United States federal income tax withholding to the extent such withholding is, or would be, actually imposed upon payments to the Liquidity Provider as of the date of this Agreement (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. Whenever any Non-Excluded Tax is payable by the Borrower, promptly thereafter the Borrower shall send the Liquidity Provider certified copies of tax receipts evidencing such payment by the Borrower. The Liquidity Provider agrees to provide to the Borrower on or prior to the Effective Date, and from time to time thereafter 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), to the extent that the Liquidity Provider is legally entitled to do so, two original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is completely exempt from United States withholding tax on payments pursuant to this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.03 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.04 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 the office of Citibank, N.A., New York City, for credit to KfW, Account No.109-260-93. 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 (x) interest based on the LIBOR Rate and (y) fees payable to the Liquidity Provider shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.06 Payment on Non-Business Days. Whenever any payment to be made hereunder (other than a payment on LIBOR Advances) becomes due and payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Advance becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. Section 3.07 Interest. (a) The Borrower shall pay, or shall cause to be paid, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Downgrade Advance, from and including the date on which the amount thereof was withdrawn from the Class A Cash Account to pay interest on the Class A Pass Through Certificates) to but excluding the date such principal amount shall be paid in full and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance set forth below 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. Nothing contained in this Section 3.07 shall require the Borrower to pay any amount under this Section 3.07 other than to the extent the Borrower shall have funds available therefor. (b) Except as provided in Section 3.07(e), 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. (c) Each LIBOR Advance shall bear interest during each Interest Period at a per annum rate equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each Downgrade Advance (other than an Applied Downgrade Advance) shall bear interest during the period from and including the date of the making of such Downgrade Advance through but excluding the Expiry Date (or, if earlier, the date of repayment thereof or of conversion thereof into a Final Advance), in an amount equal to the sum of (i) Investment Earnings on amounts on deposit in the Class A Cash Account for such period plus (ii) 0.25% per annum on the amount of such Downgrade Advance, payable in arrears on each Regular Distribution Date and on the date of repayment thereof or conversion thereof into a Final Advance. (f) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances) shall bear interest at the Base Rate plus 1.00% per annum. (g) 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. Subject to Section 5.02(b), from time to time, upon the effective date and time specified in a written and completed Notice of Replacement Borrower in substantially the form of Annex III attached hereto (a "Notice of Replacement Borrower") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 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 as a result of: (a) Any payment or prepayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; (b) Any failure by the Borrower to borrow or convert, as the case may be, a LIBOR Advance on the date for borrowing or conversion, as the case may be, specified in the relevant notice under Section 2.02 or 3.07; or (c) Any conversion of a LIBOR Advance to a Base Rate Advance other than on the last day of the Interest Period for such Advance. Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. In the event any change of the nature described in the preceding sentence shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its Base Rate Advances, the Liquidity Provider shall have the right to cause a Replacement Liquidity Facility to be substituted for this Agreement, subject to (i) the satisfaction of the conditions precedent to the effectiveness of, and the other provisions regarding, a Replacement Liquidity Facility set forth in Section 3.6(e) of the Intercreditor Agreement and (ii) such Replacement Liquidity Facility and Replacement Liquidity Provider being reasonably acceptable to Federal Express Corporation. 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, each dated such date (except for those documents delivered pursuant to paragraphs (v) and (vii) of this Section 4.01(a)), and each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Counterparts (or certified copies thereof) of each of the Operative Agreements (other than this Agreement and the Intercreditor Agreement) which, when taken together, bear the signatures of all of the respective parties thereto and which are in full force and effect in accordance with their respective terms; (iv) A copy of the Prospectus and specimen copies of the Class A Pass Through Certificates; (v) Evidence that, on the Effective Date, the Class A Pass Through Certificates, the Class B Pass Through Certificates and the Class C Pass Through Certificates will receive long-term credit ratings from Moody's of not lower than Aa2, A1 and Baa1, respectively, and from Standard & Poor's of not lower than AAA, AA and BBB+, respectively; (vi) An executed or certified copy of each document, instrument, certificate and opinion delivered pursuant to the Class A Supplement, the Intercreditor Agreement, the Participation Agreements and the other Operative Agreements (together with, in the case of each such opinion (unless such opinion is addressed to the Liquidity Provider), other than the opinion of counsel for the Underwriters, a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as if it were addressed to the Liquidity Provider); (vii) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Pass Through Trustee and the Liquidity Provider created by the Operative Agreements; (viii) Copies of the appraisals attached as exhibits to the Prospectus; and (ix) A letter from Federal Express Corporation agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 4.03 of the Pass Through Agreements; and (x) Such other documents, instruments, opinions and approvals (and, if requested by the Liquidity Provider, certified duplicates or executed copies thereof) as the Liquidity Provider shall have reasonably requested. (b) The following statements shall be true and shall be deemed to have been represented by each party (other than clause (ii) below, which shall be deemed to have been represented only by Federal Express Corporation) on and as of the Effective Date: (i) The representations and warranties of such Person contained in each Participation Agreement are true and correct on and as of the Effective Date as though made on and as of the Effective Date; and (ii) No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Pass Through Certificates under the Pass Through Agreements shall have been satisfied, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied, and all conditions precedent to the purchase of the Pass Through Certificates by the Underwriters under the Underwriting Agreement shall have been satisfied (except for any of such conditions precedent under the Underwriting Agreement that shall have been waived by the Underwriters). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.01 have been satisfied or waived (other than this Section 4.01(e)). 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, except in the case of a Final Advance, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advance requested. ARTICLE V COVENANTS Section 5.01 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such 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 any Operative Agreement (but not including the Tax Indemnity Agreement as defined in the Participation Agreement) entered into after the date hereof. Section 5.02 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not, without the written consent of the Liquidity Provider (such consent not to be unreasonably withheld): (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment or supplement or make any waiver with respect to, any provision of the Pass Through Agreements, except for any supplemental agreement to the Pass Through Agreements provided for in Section 11.01 thereof. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower. ARTICLE VI FINAL ADVANCE Section 6.01 Final Advance. If (a) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (b) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a Final Advance whereupon (i) the Liquidity Provider shall have no further obligation to make Advances hereunder, (ii) all other outstanding Advances shall be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iii) subject to Sections 2.07 and 2.09, all Advances, any accrued interest thereon and any other amounts outstanding hereunder shall become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.01 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, 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: First Security Bank, National Association 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Services Telephone: (801) 246-5630 Telecopy: (801) 246-5053 Liquidity Provider: Kreditanstalt fur Wiederaufbau Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Attention: Head of Aircraft Finance Department K111 b 3 Telephone: 011-49-69-7431-0 Telecopy: 011-49-69-7431-2944 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, upon request, 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 Articles 8 and 9 of the Participation Agreements. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever, whether arising before, on or after the date hereof, that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with, this Agreement, the Intercreditor Agreement or the Participation Agreements; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any Related Indemnitee, (ii) that is ordinary and usual operating overhead expense or (iii) to the extent such Expense is attributable to the failure by such Liquidity Indemnitee or its Related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Agreement. The indemnities contained in Articles 8 and 9 of the Participation Agreements, and the provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07, 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 or directors shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or gross negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) The Liquidity Provider shall not be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or gross 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 of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider and (B) on demand, all reasonable costs and expenses of the Liquidity Provider (including reasonable counsel fees and expenses) in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Cash Accounts. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.08 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 the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other party, subject to the requirement of Section 7.08(b). The Liquidity Provider may grant participations herein or in any of its rights or security hereunder and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirement of Section 7.08(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. Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider had not participated the interest). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation to any bank or other entity (each, a "Participant"), then, concurrently with the effectiveness of such participation, the Participant shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld by the Borrower or the Liquidity Provider with respect to any payments to be made to such Participant in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Participant's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Participant is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate without any obligation to gross-up or indemnify pursuant to Section 3.03. (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 invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) if such party does not maintain an office for the transaction of its business in New York, agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.02, 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 CANNOT BE MODIFIED ORALLY. (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 judgment 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 and the other Operative Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements of such parties. Section 7.14 Headings; Section References. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless the context otherwise requires or otherwise indicated herein, all Section references in this Agreement are references to Sections hereof. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By: ------------------------------------ Name: Title: KREDITANSTALT FUR WIEDERAUFBAU, as Liquidity Provider By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: Annex I to Irrevocable Revolving Credit Agreement -------------------------- INTEREST ADVANCE NOTICE OF BORROWING First Security Bank, National Association, acting not in its individual capacity but solely as Subordination Agent, as borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau, (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates dated as of June 15, 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 for the payment of interest on the Class A Pass Through Certificates which was payable on the Distribution Date falling on __________ in accordance with the terms and provisions of the Class A Supplement and the Class A Pass Through Certificates and has not been paid pursuant to clause fourth of Section 3.2 of the Intercreditor Agreement or clause sixth of Section 3.3 of the Intercreditor Agreement, which Advance is requested to be made on ___________________. (3) The amount of the Interest Advance requested hereby (i) is $________, to be applied in respect of the payment of interest which was due and payable on the Class A Pass Through Certificates on such Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Pass Through Certificates, the Class B Pass Through Certificates or the Class C Pass Through Certificates, or interest on the Class B Pass Through Certificates or the Class C Pass Through Certificates, (iii) was computed in accordance with the provisions of the Class A Pass Through Certificates, the Class A Supplement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Available Commitment on the date hereof, and (v) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Sections 3.2 or 3.3 of the Intercreditor Agreement, as the case may be, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the __ day of ______________, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, 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] Annex II to Irrevocable Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING FIRST SECURITY BANK, NATIONAL ASSOCIATION, acting not in its individual capacity but solely as Subordination Agent, as borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates dated as of June 15, 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 Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the debt rating of the Liquidity Provider issued by either Rating Agency below the applicable Threshold Rating, which Advance is requested to be made on ____________. (3) The amount of the Downgrade Advance requested hereby (i) is $_____, which equals the Available Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash 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 Pass Through Certificates, or principal of, or interest or premium on, the Class B Pass Through Certificates or the Class C Pass Through Certificates, (iii) was computed in accordance with the provisions of the Class A Pass Through Certificates, the Class A Supplement 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 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. 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 ______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------------- Name: Title: SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] Annex III to Irrevocable Revolving Credit Agreement NOTICE OF REPLACEMENT BORROWER [Date] Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of _______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------------- Name: Title: Annex IV Irrevocable Revolving Credit Agreement NOTICE OF AUTOMATIC REDUCTION OF COMMITMENT [Date] Ladies and Gentlemen: The undersigned, duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby notifies Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates dated as of June 15, 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, pursuant to Section 2.04(a) of the Liquidity Agreement, the Commitment has been automatically reduced to $____________. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Automatic Reduction of Commitment as of the ___day of _______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------------- Name: Title: IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS B PASS THROUGH CERTIFICATES Dated as of June 15, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Subordination Agent, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, as Borrower and KREDITANSTALT FUR WIEDERAUFBAU as Liquidity Provider Relating to Federal Express Corporation 1998-1-B Pass Through Trust 6.845% Federal Express Corporation Pass Through Certificates, Series 1998-1 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.............................................7 Section 2.02 Making the Advances......................................7 Section 2.03 Fees.....................................................9 Section 2.04 Reduction or Termination of the Commitment...............9 Section 2.05 Repayments of Interest Advances or the Final Advance.....9 Section 2.06 Repayments of Downgrade Advances........................10 Section 2.07 Payments to the Liquidity Provider Under the Intercreditor Agreement.................................11 Section 2.08 Book Entries............................................11 Section 2.09 Payments from Available Funds Only......................11 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01 Increased Costs.........................................12 Section 3.02 Capital Adequacy........................................13 Section 3.03 Payments Free of Deductions.............................13 Section 3.04 Payments................................................14 Section 3.05 Computations............................................14 Section 3.06 Payment on Non-Business Days............................14 Section 3.07 Interest................................................15 Section 3.08 Replacement of Borrower.................................16 Section 3.09 Funding Loss Indemnification............................16 Section 3.10 Illegality..............................................16 ARTICLE IV CONDITIONS PRECEDENT Section 4.01 Conditions Precedent to Effectiveness of Section 2.01...17 Section 4.02 Conditions Precedent to Borrowing.......................19 ARTICLE V COVENANTS Section 5.01 Affirmative Covenants of the Borrower...................20 Section 5.02 Negative Covenants of the Borrower......................20 ARTICLE VI FINAL ADVANCE Section 6.01 Final Advance...........................................21 ARTICLE VII MISCELLANEOUS Section 7.01 Amendments, Etc.........................................21 Section 7.02 Notices, Etc............................................21 Section 7.03 No Waiver; Remedies.....................................22 Section 7.04 Further Assurances......................................22 Section 7.05 Indemnification; Survival of Certain Provisions.........22 Section 7.06 Liability of the Liquidity Provider.....................23 Section 7.07 Costs, Expenses and Taxes...............................23 Section 7.08 Binding Effect; Participations..........................24 Section 7.09 Severability............................................25 Section 7.10 GOVERNING LAW...........................................25 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial........25 Section 7.12 Execution in Counterparts...............................27 Section 7.13 Entirety................................................27 Section 7.14 Headings; Section References............................27 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES........27 ANNEX I - Interest Advance Notice of Borrowing ANNEX II - Downgrade Advance Notice of Borrowing ANNEX III - Notice of Replacement Borrower ANNEX IV - Notice of Automatic Reduction of Commitment IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS B PASS THROUGH CERTIFICATES IRREVOCABLE REVOLVING CREDIT AGREEMENT, CLASS B PASS THROUGH CERTIFICATES dated as of June 15, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class B Pass Through Trust (as defined below) (the "Borrower"), and KREDITANSTALT FUR WIEDERAUFBAU, a corporation organized under the public law of the Republic of Germany ("KfW" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class B Supplement (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 Pass Through Trust is issuing the Class B Pass Through Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class B Pass Through 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: "Advance" means an Interest Advance, a Final Advance, a Downgrade Advance or an Applied Downgrade Advance. "Applicable Liquidity Rate" means the rates of interest specified in Section 3.07(g) with respect to any Advance or any other amount. "Applicable Margin" means, with respect to any Advance, 1.25% (125 basis points) per annum. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.06(a). "Available Commitment" means, at any time of determination, an amount equal to (i) the Commitment at such time less (ii) subject to the third sentence of Section 2.02(a), the aggregate amount of each Advance outstanding at such time; provided that following a Downgrade Advance or a Final Advance, the Available Commitment shall be zero. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to (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 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 1 percent (0.25%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing or pursuant to Section 6.01. "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 Memphis, Tennessee, New York, New York, Frankfurt, Germany or, so long as any Class B Pass Through Certificates are outstanding, the city and state in which the Pass Through Trustee of the Class B Pass Through Trust 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 based on the LIBOR Rate, on which dealings in U.S. dollars are carried on in the London interbank market (a "London Business Day"); provided, however, that if the day in question relates to the effectiveness of the LIBOR Rate, Business Day shall mean a London Business Day on which commercial banks are not required or authorized to close in New York, New York. "Calculation Agent" means the Liquidity Provider. "Commitment" means, initially, $18,610,051, as the same may be reduced from time to time in accordance with Section 2.04(a). "Downgrade Advance" means an Advance made pursuant to Section 2.02(b). "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. "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 30, 2020. "Final Advance" means an Advance made pursuant to Sections 2.02(c) and 6.01. "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Pass Through Trustee, 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 date such LIBOR Advance is made (or is converted from a Base Rate Advance) and ending on the next Regular Distribution Date; and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date; provided, however, that 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 making of such Final Advance (in the cause of clause (x) above) or the Regular Distribution Date following such conversion (in the case of clause (y) above). "Lending Office" means the lending office of the Liquidity Provider, presently located at Frankfurt, Germany, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or London, England. "LIBOR Rate" means, with respect to any Interest Period, the interest rate per annum (calculated on the basis of a 360-day year and actual days elapsed) at which deposits in United States dollars are offered to prime banks in the London interbank market as indicated on display page 3750 (British Bankers Association-LIBOR) of the Dow Jones Markets Service (or such other page as may replace such display page 3750 for the purpose of displaying London interbank offered rates for United States dollar deposits) or, if not so indicated, the average (rounded upwards to the nearest 1/100%), as determined by the Calculation Agent, of such rates as indicated on the Reuters Screen LIBO Page (or such other page as may replace such Reuters Screen LIBO Page for the purpose of displaying London interbank offered rates for United States dollar deposits) or, if neither such alternative is indicated, the average (rounded upwards to the nearest 1/100%), as determined by the Calculation Agent, of such rates offered by the London Reference Banks to prime banks in the London interbank market, in each case at or about 11:00 a.m. (London time) on the day two LIBOR Business Days prior to the first day of such Interest Period for deposits of a duration equal to such Interest Period (or such other period most nearly corresponding to such period) in an amount substantially equal to the principal amount of the applicable LIBOR Advance as of the first day of such Interest Period. The Calculation Agent will, if necessary, request that each of the London Reference Banks provide a quotation of its rate. If at least two such quotations are provided, the rate will be the average of the quotations (rounded upwards to the nearest 1/100%). If no such quotation can be obtained, the rate will be LIBOR for the immediately preceding Interest Period. "Liquidity Event of Default" means the occurrence of the following: all of the Equipment Trust Certificates shall have been either declared to be immediately due and payable or shall not have been paid at their final maturity. Notwithstanding the foregoing, a Liquidity Event of Default shall not occur upon an automatic acceleration of the Equipment Trust Certificates as a result of a Federal Express Corporation Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) each affiliate of the Liquidity Provider, (iii) the respective directors, officers, employees, agents and servants of the Liquidity Provider and its affiliates, and (iv) the successors and permitted assigns of the persons described in clauses (i) through (iii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "London Reference Banks" means the principal London offices of National Westminster Bank Plc, Barclays Bank Plc and Bayrische Landesbank Girozentrale, or such other bank or banks as may from time to time be agreed to by Federal Express Corporation and the Calculation Agent. "Non-Excluded Tax" has the meaning specified in Section 3.03. "Notice of Borrowing" has the meaning specified in Section 2.02(d). "Notice of Replacement Borrower" has the meaning specified in Section 3.08. "Participant" has the meaning assigned to such term in Section 7.08(b). "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Trust Certificates are Performing Equipment Trust Certificates. "Prospectus" means the basic prospectus included in the registration statement on Form S-3 (File No. 333-49411) filed by Federal Express Corporation relating to certain pass through certificates, as supplemented by the prospectus supplement dated June 30, 1998 reflecting the terms of the Pass Through Certificates, as such Prospectus may be amended or supplemented. "Related Indemnitee" means, with respect to any Liquidity Indemnitee, its director, officer, employee, agent, affiliate or employer. "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 B Pass Through Certificates, that would be payable on the Class B Pass Through 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 Pass Through Certificates on such day and without regard to expected future payments of principal on the Class B Pass Through Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class B Pass Through Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Pass Through Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the date on which the Liquidity Provider makes the Final Advance; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Unpaid Advance" has the meaning assigned to such term in Section 2.05. (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: "Class A Pass Through Certificates", "Class B Cash Account", "Class B Pass Through Certificateholders", "Class B Pass Through Certificates", "Class B Pass Through Trust", "Class B Supplement", "Class C Pass Through Certificates", "Closing Date", "Controlling Party", "Corporate Trust Office", "Distribution Date", "Equipment Trust Certificates", "Federal Express Corporation", "Federal Express Corporation Bankruptcy Event", "Indenture", "Investment Earnings", "Liquidity Facility", "Moody's", "Operative Agreements", "Participation Agreements", "Pass Through Agreement", "Pass Through Certificate", "Pass Through Trustee", "Performing Equipment Trust Certificates", "Person", "Pool Balance", "Rating Agency", "Regular Distribution Dates", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Triggering Event", "Underwriters", "Underwriting Agreement" 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 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 Available Commitment at such time and shall be used solely for the payment when due of interest on the Class B Pass Through Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.02(a), together with accrued interest thereon (as provided herein), the Available Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Available Commitment shall not be so reinstated at any time if (i) both (x) a Triggering Event shall have occurred and be continuing and (y) a Performing Note Deficiency exists or (ii) a Liquidity Event of Default shall have occurred and be continuing. (b) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the rating of the Liquidity Provider resulting in the Liquidity Provider's ratings not meeting the Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement), unless a Replacement Liquidity Facility shall have been delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Available Commitment at such time, and shall be used to fund the Class B Cash Account in accordance with said Section 3.6(c). (c) A Final Advance shall be made by the Liquidity Provider without the necessity for a Notice of Borrowing at the option of the Liquidity Provider on the occurrence of an event described in Section 6.01(a) or 6.01(b) in an amount equal to the Available Commitment at such time, and shall be used to fund the Class B Cash Account. (d) Each Borrowing (other than the making of a Final Advance) shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.02(a) or 2.02(b), as the case may be, given not later than 12:00 Noon (New York City time) on the second Business Day prior to the day of the proposed Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the date of such Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the third Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (e) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other person (including the holder of any Class B Pass Through Certificates or the Pass Through Trustee of the Class B Pass Through Trust) who makes to the Pass Through Trustee of the Class B Pass Through Trust or the Borrower a demand for payment with respect to any Class B Pass Through Certificates. 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. (a) The Borrower agrees to pay to the Liquidity Provider a fee equal to 0.25% of the Commitment (as in effect on the Effective Date). Such fee shall be payable on the Effective Date. (b) The Borrower shall pay, or shall cause to be paid, to the Liquidity Provider, a fee equal to 0.25% per annum on the average Available Commitment from the Effective Date to the earlier of the date on which a Downgrade Advance is made and the date on which the Commitment terminates. Such fee shall be payable in arrears on each Regular Distribution Date. Nothing contained in this Section 2.03(b) shall require the Borrower to pay any amount under this Section 2.03(b) other than to the extent the Borrower shall have funds available therefor. Section 2.04 Reduction or Termination of the Commitment. (a) Automatic Reductions. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class B Pass Through Certificates or otherwise, the Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Commitment (substantially in the form of Annex IV hereto) to the Liquidity Provider (with a copy to Federal Express Corporation) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Commitment. (b) Termination. Upon the making of any Downgrade Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.05 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.07 and 2.09, the Borrower hereby agrees to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Interest Advance or the Final Advance (any such Interest Advance or the Final Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.07. Subject to Sections 2.06, 2.07 and 2.09, unless otherwise waived by the Liquidity Provider, the Borrower shall be obligated, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to repay the Liquidity Provider for all Interest Advances and Final Advances on the same day as made and all Applied Downgrade Advances on the same day they become Applied Downgrade Advances in accordance with Section 2.06 hereof. The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and the Final Advance on the date such Interest Advance or the Final Advance is made and each Applied Downgrade Advance on the date it becomes an Applied Downgrade Advance is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.06 Repayments of Downgrade Advances. (a) Amounts advanced hereunder in respect of a Downgrade Advance shall be deposited in the Class B Cash Account, and invested and withdrawn from the Class B Cash Account, as set forth in Sections 3.6(c), (e) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Downgrade Advance, interest on the principal amount of any such Downgrade Advance as provided in Section 3.07; provided, however, that (i) any distribution to the Liquidity Provider of Investment Earnings pursuant to Section 3.6(f) of the Intercreditor Agreement shall constitute a payment of interest on such Downgrade Advance in the amount of such Investment Earnings (not to exceed the amount specified in Section 3.07) and (ii) amounts in respect of a Downgrade Advance withdrawn from the Class B Cash Account for the purpose of paying interest on the Class B Pass Through Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being an "Applied Downgrade Advance") shall be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Immediately upon the withdrawal of any amounts from the Class B Cash Account on account of a reduction in the Required Amount, the Borrower shall repay the Downgrade Advances in a principal amount equal to the amount of such reduction, plus interest on the principal amount repaid as provided in Section 3.07. (b) At any time when an Applied Downgrade Advance (or any portion thereof) is outstanding, upon the deposit in the Class B Cash Account of any amount pursuant to clause "third" of Section 2.4(b), clause "third" of Section 3.2 or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Downgrade Advances shall be automatically reduced by the amount of such Replenishment Amount and (ii) the principal amount of the outstanding Downgrade Advance 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, and prior to the effectiveness of any Replacement Liquidity Facility, the Borrower agrees that all amounts owing to the Liquidity Provider shall be repaid in full, whether from advances made by the Replacement Liquidity Provider, from amounts remaining on deposit in the Class B Cash Account after giving effect to any application of funds therefrom to any payment of interest on the Class B Pass Through Certificates on the date of such replacement, or otherwise. 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 in the order of priority required by the applicable provisions of Articles II and III of the Intercreditor Agreement. 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 amounts received by it that constitute Scheduled Payments or Special Payments or amounts payable to it under Article 8, 9 or 10 of any Participation 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 B Cash Account shall be available to make payments only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01 Increased Costs. If the Liquidity Provider shall determine that (a) any change after the date hereof in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof or in the compliance by the Liquidity Provider (or its head office) with any applicable direction, request or requirement (whether or not having the force of law) of any central bank or competent governmental or other authority shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans made by, the Liquidity Provider, or (ii) impose on the Liquidity Provider any other condition regarding this Agreement or any Advance, or (iii) change the basis of taxation of any amounts payable to the Liquidity Provider (other than Taxes imposed on the overall net or gross income of the Liquidity Provider) and (b) the result of any event referred to in the preceding clause (i), (ii) or (iii) shall be to increase the cost to the Liquidity Provider of issuing or maintaining its commitment or funding or maintaining Advances (which increase in cost shall be determined by the Liquidity Provider's reasonable allocations of the aggregate of such cost increases resulting from such event), or to reduce the amount of any sum received or receivable by the Liquidity Provider under this Agreement with respect thereto, then, upon demand by the Liquidity Provider (such demand to be made not later than 60 days after a Responsible Officer of the Liquidity Provider obtains actual knowledge of any event referred to in clause (i), (ii) or (iii) above), the Borrower shall pay, or cause to be paid, to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such increased cost or reduction; provided that if such demand for payment is made after such 60-day period, the Borrower shall be obligated to pay such additional amounts only with respect to such increased cost or reduction actually incurred or effected on or after the 60th day prior to the date of such demand. A certificate as to such increased cost or reduction (which shall set forth the basis for such increased cost or reduction) incurred by the Liquidity Provider as a result of any event mentioned in clause (i), (ii) and (iii) above, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.01 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.02 Capital Adequacy. If the Liquidity Provider shall determine that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, 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 head office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in each case after the date hereof, has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, upon demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such reduction in respect of issuing or maintaining its commitment hereunder or its funding or maintaining Advances. A certificate as to such additional amount describing the event which has the effect of reducing the rate of return on the Liquidity Provider's capital, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.02 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.03 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 any Taxes imposed on the overall net income of the Liquidity Provider and excluding United States federal income tax withholding to the extent such withholding is, or would be, actually imposed upon payments to the Liquidity Provider as of the date of this Agreement (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non- Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. Whenever any Non-Excluded Tax is payable by the Borrower, promptly thereafter the Borrower shall send the Liquidity Provider certified copies of tax receipts evidencing such payment by the Borrower. The Liquidity Provider agrees to provide to the Borrower on or prior to the Effective Date, and from time to time thereafter 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), to the extent that the Liquidity Provider is legally entitled to do so, two original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is completely exempt from United States withholding tax on payments pursuant to this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.03 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.04 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 the office of Citibank, N.A., New York City, for credit to KfW, Account No.109-260-93. 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 (x) interest based on the LIBOR Rate and (y) fees payable to the Liquidity Provider shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.06 Payment on Non-Business Days. Whenever any payment to be made hereunder (other than a payment on LIBOR Advances) becomes due and payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Advance becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. Section 3.07 Interest. (a) The Borrower shall pay, or shall cause to be paid, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Downgrade Advance, from and including the date on which the amount thereof was withdrawn from the Class B Cash Account to pay interest on the Class B Pass Through Certificates) to but excluding the date such principal amount shall be paid in full and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance set forth below 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. Nothing contained in this Section 3.07 shall require the Borrower to pay any amount under this Section 3.07 other than to the extent the Borrower shall have funds available therefor. (b) Except as provided in Section 3.07(e), 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. (c) Each LIBOR Advance shall bear interest during each Interest Period at a per annum rate equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each Downgrade Advance (other than an Applied Downgrade Advance) shall bear interest during the period from and including the date of the making of such Downgrade Advance through but excluding the Expiry Date (or, if earlier, the date of repayment thereof or of conversion thereof into a Final Advance), in an amount equal to the sum of (i) Investment Earnings on amounts on deposit in the Class B Cash Account for such period plus (ii) 0.25% per annum on the amount of such Downgrade Advance, payable in arrears on each Regular Distribution Date and on the date of repayment thereof or conversion thereof into a Final Advance. (f) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances) shall bear interest at the Base Rate plus 1.00% per annum. (g) 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. Subject to Section 5.02(b), from time to time, upon the effective date and time specified in a written and completed Notice of Replacement Borrower in substantially the form of Annex III attached hereto (a "Notice of Replacement Borrower") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 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 as a result of: (a) Any payment or prepayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; (b) Any failure by the Borrower to borrow or convert, as the case may be, a LIBOR Advance on the date for borrowing or conversion, as the case may be, specified in the relevant notice under Section 2.02 or 3.07; or (c) Any conversion of a LIBOR Advance to a Base Rate Advance other than on the last day of the Interest Period for such Advance. Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. In the event any change of the nature described in the preceding sentence shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its Base Rate Advances, the Liquidity Provider shall have the right to cause a Replacement Liquidity Facility to be substituted for this Agreement, subject to (i) the satisfaction of the conditions precedent to the effectiveness of, and the other provisions regarding, a Replacement Liquidity Facility set forth in Section 3.6(e) of the Intercreditor Agreement and (ii) such Replacement Liquidity Facility and Replacement Liquidity Provider being reasonably acceptable to Federal Express Corporation. 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, each dated such date (except for those documents delivered pursuant to paragraphs (v) and (vii) of this Section 4.01(a)), and each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Counterparts (or certified copies thereof) of each of the Operative Agreements (other than this Agreement and the Intercreditor Agreement) which, when taken together, bear the signatures of all of the respective parties thereto and which are in full force and effect in accordance with their respective terms; (iv) A copy of the Prospectus and specimen copies of the Class B Pass Through Certificates; (v) Evidence that, on the Effective Date, the Class A Pass Through Certificates, the Class B Pass Through Certificates and the Class C Pass Through Certificates will receive long-term credit ratings from Moody's of not lower than Aa2, A1 and Baa1, respectively, and from Standard & Poor's of not lower than AAA, AA and BBB+, respectively; (vi) An executed or certified copy of each document, instrument, certificate and opinion delivered pursuant to the Class B Supplement, the Intercreditor Agreement, the Participation Agreements and the other Operative Agreements (together with, in the case of each such opinion (unless such opinion is addressed to the Liquidity Provider), other than the opinion of counsel for the Underwriters, a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as if it were addressed to the Liquidity Provider); (vii) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Pass Through Trustee and the Liquidity Provider created by the Operative Agreements; (viii) Copies of the appraisals attached as exhibits to the Prospectus; and (ix) A letter from Federal Express Corporation agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 4.03 of the Pass Through Agreements; and (x) Such other documents, instruments, opinions and approvals (and, if requested by the Liquidity Provider, certified duplicates or executed copies thereof) as the Liquidity Provider shall have reasonably requested. (b) The following statements shall be true and shall be deemed to have been represented by each party (other than clause (ii) below, which shall be deemed to have been represented only by Federal Express Corporation) on and as of the Effective Date: (i) The representations and warranties of such Person contained in each Participation Agreement are true and correct on and as of the Effective Date as though made on and as of the Effective Date; and (ii) No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Pass Through Certificates under the Pass Through Agreements shall have been satisfied, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied, and all conditions precedent to the purchase of the Pass Through Certificates by the Underwriters under the Underwriting Agreement shall have been satisfied (except for any of such conditions precedent under the Underwriting Agreement that shall have been waived by the Underwriters). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.01 have been satisfied or waived (other than this Section 4.01(e)). 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, except in the case of a Final Advance, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advance requested. ARTICLE V COVENANTS Section 5.01 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such 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 any Operative Agreement (but not including the Tax Indemnity Agreement as defined in the Participation Agreement) entered into after the date hereof. Section 5.02 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not, without the written consent of the Liquidity Provider (such consent not to be unreasonably withheld): (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment or supplement or make any waiver with respect to, any provision of the Pass Through Agreements, except for any supplemental agreement to the Pass Through Agreements provided for in Section 11.01 thereof. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower. ARTICLE VI FINAL ADVANCE Section 6.01 Final Advance. If (a) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (b) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a Final Advance whereupon (i) the Liquidity Provider shall have no further obligation to make Advances hereunder, (ii) all other outstanding Advances shall be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iii) subject to Sections 2.07 and 2.09, all Advances, any accrued interest thereon and any other amounts outstanding hereunder shall become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.01 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, 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: First Security Bank, National Association 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Services Telephone: (801) 246-5630 Telecopy: (801) 246-5053 Liquidity Provider: Kreditanstalt fur Wiederaufbau Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Attention: Head of Aircraft Finance Department K111 b 3 Telephone: 011-49-69-7431-0 Telecopy: 011-49-69-7431-2944 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, upon request, 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 Articles 8 and 9 of the Participation Agreements. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever, whether arising before, on or after the date hereof, that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with, this Agreement, the Intercreditor Agreement or the Participation Agreements; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any Related Indemnitee, (ii) that is ordinary and usual operating overhead expense or (iii) to the extent such Expense is attributable to the failure by such Liquidity Indemnitee or its Related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Agreement. The indemnities contained in Articles 8 and 9 of the Participation Agreements, and the provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07, 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 or directors shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or gross negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) The Liquidity Provider shall not be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or gross 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 of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider and (B) on demand, all reasonable costs and expenses of the Liquidity Provider (including reasonable counsel fees and expenses) in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Cash Accounts. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.08 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 the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other party, subject to the requirement of Section 7.08(b). The Liquidity Provider may grant participations herein or in any of its rights or security hereunder and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirement of Section 7.08(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. Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider had not participated the interest). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation to any bank or other entity (each, a "Participant"), then, concurrently with the effectiveness of such participation, the Participant shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld by the Borrower or the Liquidity Provider with respect to any payments to be made to such Participant in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Participant's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Participant is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate without any obligation to gross-up or indemnify pursuant to Section 3.03. (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 invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) if such party does not maintain an office for the transaction of its business in New York, agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.02, 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 CANNOT BE MODIFIED ORALLY. (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 judgment 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 and the other Operative Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements of such parties. Section 7.14 Headings; Section References. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless the context otherwise requires or otherwise indicated herein, all Section references in this Agreement are references to Sections hereof. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By:________________________________________ Name: Title: KREDITANSTALT FUR WIEDERAUFBAU, as Liquidity Provider By:________________________________________ Name: Title: By:________________________________________ Name: Title: Annex I to Irrevocable Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING First Security Bank, National Association, acting not in its individual capacity but solely as Subordination Agent, as borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau, (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates dated as of June 15, 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 for the payment of interest on the Class B Pass Through Certificates which was payable on the Distribution Date falling on __________ in accordance with the terms and provisions of the Class B Supplement and the Class B Pass Through Certificates and has not been paid pursuant to clause fourth of Section 3.2 of the Intercreditor Agreement or clause sixth of Section 3.3 of the Intercreditor Agreement, which Advance is requested to be made on ___________________. (3) The amount of the Interest Advance requested hereby (i) is $________, to be applied in respect of the payment of interest which was due and payable on the Class B Pass Through Certificates on such Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Pass Through Certificates, the Class B Pass Through Certificates or the Class C Pass Through Certificates, or interest on the Class A Pass Through Certificates or the Class C Pass Through Certificates, (iii) was computed in accordance with the provisions of the Class B Pass Through Certificates, the Class B Supplement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Available Commitment on the date hereof, and (v) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Sections 3.2 or 3.3 of the Intercreditor Agreement, as the case may be, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the __ day of ______________, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, 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] Annex II to Irrevocable Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING FIRST SECURITY BANK, NATIONAL ASSOCIATION, acting not in its individual capacity but solely as Subordination Agent, as borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates dated as of June 15, 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 Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the debt rating of the Liquidity Provider issued by either Rating Agency below the applicable Threshold Rating, which Advance is requested to be made on ____________. (3) The amount of the Downgrade Advance requested hereby (i) is $_____, which equals the Available Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash 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 Pass Through Certificates, or principal of, or interest or premium on, the Class A Pass Through Certificates or the Class C Pass Through Certificates, (iii) was computed in accordance with the provisions of the Class B Pass Through Certificates, the Class B Supplement 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 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. 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 ______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By:________________________________________ Name: Title: SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] Annex III to Irrevocable Revolving Credit Agreement NOTICE OF REPLACEMENT BORROWER [Date] Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of _______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By:________________________________________ Name: Title: Annex IV Irrevocable Revolving Credit Agreement NOTICE OF AUTOMATIC REDUCTION OF COMMITMENT [Date] Ladies and Gentlemen: The undersigned, duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby notifies Kreditanstalt fur Wiederaufbau (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates dated as of June 15, 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, pursuant to Section 2.04(a) of the Liquidity Agreement, the Commitment has been automatically reduced to $____________. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Automatic Reduction of Commitment as of the ___day of _______, ____. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Subordination Agent, as Borrower By:________________________________________ Name: Title: EX-4.B1 6 EXHIBIT 4.b.1 - ------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48481, REGISTRATION NO. N585FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account.................................................. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates........................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 61 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers...... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease............................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Modification Agreement (to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale), the GTA, the Engine Warranty Assignment and the Engine Consent, the Bills of Sale, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments); and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to September 15, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) As contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N585FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) - ------------ (1) This recital is to be included only in the first Indenture Supplement. WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (2)This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N585FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.* - ------------ (1) To be inserted in the case of a Series B Certificate. * To be inserted for each Certificate other than any Series A Certificate. [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------ (2) To be inserted in the case of a Series C Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N585FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N585FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ------------------- SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount -------------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date July 15, 2020 January 15, 2019 January 15, 2016 - ------------------------------------------------------------------------------------------------------------------ January 15, 1999 $ 0 $ 0 $ 353,838 January 15, 2000 0 0 1,132,164 January 15, 2001 0 802,635 362,685 January 15, 2002 0 866,796 382,870 July 15, 2002 925,464 2,618 0 January 15, 2003 0 0 360,620 July 15, 2003 1,305,366 489,512 0 January 15, 2004 0 0 1,084,451 July 15, 2004 1,305,366 489,512 0 July 15, 2005 1,305,366 489,512 0 January 15, 2006 1,305,366 489,513 369,835 January 15, 2007 1,305,366 489,512 652,683 January 15, 2008 1,305,366 489,512 652,683 January 15, 2009 1,305,365 489,512 652,683 January 15, 2010 1,305,366 489,512 652,683 January 15, 2011 1,305,366 489,513 652,683 January 15, 2012 1,305,366 489,512 652,683 January 15, 2013 1,740,488 652,683 1,127,681 January 15, 2014 1,740,488 652,683 2,178,010 January 15, 2015 1,740,487 652,683 2,503,985 January 15, 2016 1,740,488 652,683 2,892,763 January 15, 2017 1,740,488 652,682 0 January 15, 2018 1,740,488 657,770 0 January 15, 2019 3,350,297 2,605,645 0 January 15, 2020 3,399,090 0 0 July 15, 2020 212,563 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N585FE and Manufacturer's serial number 48481, together with three General Electric CF6-80C2-D1F engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N585FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on January 15, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N585FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 14, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N585FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2013 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - -------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) Dated as of May 1, 1998 Amended and Restated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48505, REGISTRATION NO. N590FE - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 8 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 9 Section 2.03. Certificate of Authentication............................ 9 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 12 Section 2.06. Registration, Transfer and Exchange...................... 13 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 14 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 15 Section 2.09. Temporary Certificates................................... 15 Section 2.10. Termination of Interest in Trust Indenture Estate........ 16 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 16 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 16 Section 2.13. Subordination............................................ 16 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 17 Section 3.02. Offices for Payments, etc................................ 17 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 18 Section 3.04. Paying Agents............................................ 18 Section 3.05. Covenants of SSB and the Owner Trustee................... 18 Section 3.06. [Reserved]............................................... 19 Section 3.07. Disposal of Trust Indenture Estate....................... 19 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 19 Section 3.09. Further Assurances; Financing Statements................. 20 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 20 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 21 Section 5.02. Event of Loss and Replacement; Prepayment................ 22 Section 5.03. Payment After Indenture Event of Default, etc............ 23 Section 5.04. Certain Payments......................................... 25 Section 5.05. Other Payments........................................... 25 Section 5.06. Payments to Owner Trustee................................ 26 Section 5.07. Application of Payments.................................. 26 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 27 Section 5.09. Withholding Taxes........................................ 27 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 28 Section 6.02. Prepayment of Certificates............................... 28 Section 6.03. Notice of Prepayment to Holders.......................... 30 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 30 Section 6.05. Certificates Payable on Prepayment Date.................. 31 Section 6.06. Mandatory Sinking Fund Redemption........................ 31 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 31 Section 7.02. Remedies................................................. 34 Section 7.03. Return of Aircraft, etc.................................. 36 Section 7.04. Indenture Trustee May Prove Debt......................... 39 Section 7.05. Remedies Cumulative...................................... 40 Section 7.06. Suits for Enforcement.................................... 41 Section 7.07. Discontinuance of Proceedings............................ 41 Section 7.08. Limitations on Suits by Holders.......................... 41 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits.................................. 42 Section 7.10. Control by Holders....................................... 42 Section 7.11. Waiver of Past Indenture Default......................... 43 Section 7.12. Notice of Indenture Default.............................. 43 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 43 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 44 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 47 Section 8.03. Certain Rights of Owner Participant...................... 49 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 50 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 51 Section 9.03. Certain Rights of the Indenture Trustee.................. 53 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 54 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 54 Section 9.06. Moneys Held by Indenture Trustee......................... 54 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 54 Section 9.08. Replacement Airframes and Replacement Engines............ 55 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 58 Section 9.10. Effect of Replacement.................................... 58 Section 9.11. Compensation............................................. 58 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 59 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 59 Section 10.03. Holders to Be Treated as Owners......................... 60 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 60 Section 10.05. Right of Revocation of Action Taken..................... 61 Section 10.06. ERISA................................................... 61 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 63 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 63 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 64 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 64 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................ 65 Section 12.06. Appointment of Separate Trustees........................ 66 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 68 Section 13.02. Supplemental Indentures With Consent of Holders......... 69 Section 13.03. Effect of Supplemental Indenture........................ 71 Section 13.04. Documents to Be Given to Indenture Trustee.............. 71 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 71 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement............. 71 Section 13.07. Notices to Liquidity Providers.......................... 71 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 72 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 73 Section 14.03. Repayment of Moneys Held by Paying Agent................ 73 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 73 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 74 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 74 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 74 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 74 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease............................................... 75 Section 15.06. Notices................................................. 75 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 76 Section 15.08. Severability............................................ 76 Section 15.09. No Oral Modifications or Continuing Waivers............. 77 Section 15.10. Successors and Assigns.................................. 77 Section 15.11. Headings................................................ 77 Section 15.12. Normal Commercial Relations............................. 77 Section 15.13. Governing Law; Counterparts............................. 77 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions Schedule III -- Description of Original Indenture; Description of Aircraft TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and SSB entered into the Original Trust Agreement whereby, among other things, the Owner Trustee declared a certain trust for the use and benefit of the Owner Participant, subject, however, to the Lien of the Original Indenture; WHEREAS, the Owner Trustee and the Indenture Trustee entered into the Original Indenture for the benefit and security of the Original Loan Participant and pursuant to which the Owner Trustee issued to the Original Loan Participant the Original Loan Certificates as evidence of the loan made by the Original Loan Participant to the Owner Trustee, the proceeds of which were used by the Owner Trustee to pay a portion of the Purchase Price for the Aircraft; WHEREAS, the Original Indenture with respect to the Aircraft (as such Aircraft is more particularly described in Schedule III attached hereto) was recorded by the FAA and assigned a Conveyance Number as described on Schedule III attached hereto; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the parties hereto desire to refinance the Original Loan Certificates with the proceeds of the Certificates to be issued hereunder; WHEREAS, in connection with the refinancing of the Original Loan Certificates, the parties hereto desire to amend and restate the Original Indenture in its entirety as this Indenture sets forth, in order to provide, among other things, (i) for the issuance by the Owner Trustee of the Certificates, as provided in the Participation Agreement, and (ii) for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, among other things, of certain of the Owner Trustee's right, title and interest in and to the Aircraft, the Lease and payments and other amounts received hereunder or thereunder in accordance with the terms hereof (other than Excepted Payments), as security for the Owner Trustee's obligations to the Holders and for the ratable benefit and security of such Holders; WHEREAS, the Owner Participant and SSB, prior to the execution and delivery of this Indenture, entered into the Trust Agreement whereby the Original Trust Agreement was amended and restated and pursuant to which, among other things, the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree that such Original Indenture be and the same is hereby amended and restated to read in its entirety as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Modification Agreement (to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale), the GTA, the Engine Warranty Assignment and the Engine Consent, the Bills of Sale, the Ancillary Agreements and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) All moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder; (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee and to exercise all rights, elections and options of the Lessor in connection with the return, renewal or purchase of the Aircraft and to exercise rights with respect to the use, operation, maintenance and modification of the Aircraft, in each case pursuant to express provisions of the Operative Agreements (other than in connection with an Event of Default), and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments); (iv) subject to the last sentence of this clause (a), at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft; and (v) at all times the Owner Trustee and the Owner Participant shall have the rights granted to them under Articles VI, VIII and X and Section 7.02 hereof. Notwithstanding the foregoing, but subject always to the provisions of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) (other than with respect to Excepted Payments) declare the Lease to be in default under Article 17 thereof or any statute (including, without limitation, Article 2-A of the UCC) and (B) subject only to the provisions of this Indenture, (other than in connection with Excepted Payments) exercise the remedies set forth in such Article 17 of the Lease, any statute (including without limitation Article 2-A of the UCC), at law and in Article 7 hereof. (b) The foregoing provisions in paragraph (a) above shall be equally applicable to all rights of the Indenture Trustee in respect of Ancillary Agreement I, whether such rights are granted directly to the Indenture Trustee under such agreements or are granted under the Granting Clause of this Indenture. (c) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect and shall not have been terminated pursuant to Section 14.01 hereof, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee (other than Excepted Payments not constituting Basic Rent), enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity (subject to Section 15.01(d) of the Participation Agreement) and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Refunding Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof in immediately available funds prior to 10:30 A.M. (New York time) on the due date thereof and the Indenture Trustee shall remit all such amounts received by it to the Holders at such account or accounts at such financial institution or institutions as the Holders shall have designated to the Indenture Trustee in writing, in immediately available funds, such payment to be made if the payment was received prior to 10:30 A.M. New York time by the Indenture Trustee on any Business Day, by 12:00 noon New York time on such Business Day; otherwise, the Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New York time on the next succeeding Business Day; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof (but only to the extent actually received by the Indenture Trustee) and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof but only to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity, principal amount and interest rate and in authorized denominations for an equal aggregate principal amount; provided, that such Certificate being transferred shall be cancelled in accordance with Section 2.08 hereof simultaneously with the issuance of the new Certificate. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, principal amount and interest rate as the Certificate being replaced, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to hold each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses incurred in connection therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to hold each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (iv), (v) or (vi) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.13 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.13(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.13, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice from an insurer or an insurance broker received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved] Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB and the Indenture Trustee made under this Indenture or in the Participation Agreement or of the Owner Participant made under the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than ten (10) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent and any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof shall be distributed by the Indenture Trustee no later than the time herein provided in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss (x) with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and after the Indenture Trustee has received a request to accelerate the Certificates in accordance with Section 7.10 hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it or any investment sold by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Lessee, unless the Lessee notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) (i) if such prepayment is made under any provision of Section 6.02 hereof on or after the applicable Premium Termination Date, or (ii) if such prepayment is made prior to the applicable Premium Termination Date pursuant to Section 6.02(a)(i) or 6.02(a)(iii) above (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vi) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if, pursuant to Section 4.02(a) of the Lease, the Lessee revokes its notice of election to purchase, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Any notice of prepayment given by the Owner Trustee may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iii) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or the Owner Participant Guarantor or the Owner Trustee Guarantor, in any Operative Agreement or in any certificate of SSB, the Owner Trustee, the Owner Participant, or the Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders and if such misrepresentation is capable of being corrected as of a subsequent date and if such correction is being sought diligently, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by a Majority in Interest of Holders; or (B) any (x) covenant made by the Owner Trustee in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant) or 7.04(b) (unless such Lien is removed within the 30-day period set forth therein) of the Participation Agreement shall be breached in any respect or (y) other covenant made by the Owner Trustee, in its individual capacity or as Owner Trustee, or by the Owner Trustee Guarantor, or by the Owner Participant or the Owner Participant Guarantor in any Operative Agreement shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (iv) the Owner Trustee, the Lessor's Estate, the Owner Trustee Guarantor, the Owner Participant or the Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (v) an order for relief shall be entered in respect of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, and such petition shall not be dismissed within 60 days, or if, without the consent or acquiescence of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, and such order shall not be dismissed within 60 days; or (vii) the Owner Trustee Guaranty or the Owner Participant Guaranty shall cease to be a valid and enforceable obligation of the Owner Trustee Guarantor or the Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the significant remedies under Article 17 of the Lease (as the Indenture Trustee determines in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation of law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code plus any extension consented to by the Indenture Trustee or the Holders of Certificates of such period as permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease pursuant to Section 365 or 1110 of the Bankruptcy Code and no Event of Default (other than as specified in Section 16.01(e), (f) or (g) of the Lease, or other Event of Default in respect of which the 30-day period referred to in clause (a)(1)(B)(ii)(I) of Section 1110 of the Bankruptcy Code shall not yet have expired) shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (iv), (v) or (vi) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction to the highest bidder, with or without demand, advertisement or notice, except that in respect of any private sale 20 days prior notice will be provided, for cash or, with the consent of the Owner Trustee, which shall not be unreasonably withheld, credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in exercising reasonable commercial discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice that an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that except in the case of a default in the payment of the principal of or interest on any Certificate, under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of any portion of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Article 6 and Section 10.01(b) (insofar as such Article 6 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01 and 17.11 and Articles 8 and 9 (insofar as such Articles relate to the Indenture Trustee; it being understood that only the Indenture Trustee's consent in respect thereof need be obtained) and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent (other than Excepted Payments) payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, Termination Value or EBO Price and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value or EBO Price and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date or EBO Date, as the case may be, and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value or EBO Price and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder and (ii) to grant any consent requested under the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day which shall be not less than 15 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day which shall be not less than 15 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt by the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. (c) Any election to prepay or purchase the Certificates under this Section 8.02 shall be irrevocable, provided that if on the specified date for prepayment or purchase, the Event of Default giving rise to such election shall no longer be continuing under the Lease such election shall be deemed to be automatically withdrawn. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law or equity against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law or in equity against the Lessee for the payment of such amount or taking appropriate action in a pending action at law or in equity against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee in its individual capacity hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. So long as an Indenture Event of Default has occurred and has not been cured or waived, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee agrees that it will execute and the Owner Trustee agrees that it will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Indenture Trustee's Liens on any part of the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee shall deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee, SSB or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's general indemnity or general tax indemnity to the Indenture Trustee under said Article; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, in form and substance reasonably satisfactory to the Owner Trustee, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be liable either personally or in its capacity as such trustee, by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; and (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each and every Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee in accordance with the terms and conditions of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except in the case of (c) above as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Upon termination of this Indenture pursuant to Article XIV hereof, the Indenture Trustee in connection with the satisfaction of the Indenture shall return to the Owner Trustee all property (and related documents and instruments) constituting or evidencing the Trust Indenture Estate. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of _____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N590FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 (herein called the "Original Indenture") between the Owner Trustee and First Security Bank, National Association, as Indenture Trustee (herein called the "Indenture Trustee"), provides for the execution and delivery of a supplement thereto substantially in the form hereof which shall particularly describe the Aircraft (such term and other defined terms in the Indenture being used herein with the same meanings) and any Replacement Airframe or Replacement Engine included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft, Replacement Airframe or Replacement Engine, as the case may be, to the Indenture Trustee. WHEREAS, the Original Indenture dated as of May 1, 1998 which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998 (the Original Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code on June 1, 1998 as one document and have been assigned Conveyance No. X136036. WHEREAS, the Original Indenture, as amended and restated by the Trust Indenture and Security Agreement dated as of June 15, 1998 (herein called the "Indenture"), was duly recorded pursuant to Subtitle VII of Title 49 of the United States Code on ______________ and assigned Conveyance No. ________; NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- --------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N590FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 between the Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose in immediately available funds prior to 10:30 A.M. (New York time) on the due date thereof and the Indenture Trustee shall remit all such amounts received by it to the Holders at such account or accounts at such financial institution or institutions as the Holders shall have designated to the Indenture Trustee in writing, in immediately available funds, such payment to be made if the payment was received prior to 10:30 A.M. New York time by the Indenture Trustee on any Business Day, by 12:00 noon New York time on such Business Day; otherwise, the Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New York time on the next succeeding Business Day; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee, respectively. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, State Street Bank and Trust Company of Connecticut, National Association nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of State Street Bank and Trust Company of Connecticut, National Association, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture but not in the case of clause (i) of Section 8.02(a) of the Indenture) any Make-Whole Premium applicable to each Outstanding Certificate, plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee shall deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) - ---------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N590FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ______________ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N590FE) referred to in the within mentioned Indenture. Dated: ______________ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount
Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ---------------------
SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount -------------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2020 January 15, 2019 January 15, 2016 - ------------------------------------------------------------------------------------------------------ January 15, 1999 $ 0 $ 0 $ 664,654 January 15, 2000 0 0 1,048,588 January 15, 2001 0 498,271 603,989 January 15, 2002 54,197 556,007 570,367 July 15, 2002 1,206,886 0 0 July 15, 2003 1,321,519 495,570 0 January 15, 2004 0 0 648,239 July 15, 2004 1,321,519 495,570 0 January 15, 2005 0 1,774 0 July 15, 2005 1,321,519 493,796 0 January 15, 2006 1,321,519 495,570 120,232 January 15, 2007 1,321,519 495,570 12,107 January 15, 2008 1,321,519 495,570 275,420 January 15, 2009 1,321,519 495,570 660,759 January 15, 2010 1,321,519 495,570 660,759 January 15, 2011 1,321,519 495,570 660,759 January 15, 2012 1,762,025 660,759 881,013 January 15, 2013 1,762,025 660,759 1,144,794 January 15, 2014 1,762,025 660,759 1,932,723 January 15, 2015 1,762,025 660,759 2,242,925 January 15, 2016 1,762,025 660,759 2,608,672 January 15, 2017 1,762,025 660,759 0 January 15, 2018 1,762,025 2,143,815 0 January 15, 2019 1,762,025 499,223 0 January 15, 2020 3,524,046 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreements. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 27, 2020, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Chicago, Illinois, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N590FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing on or prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. May 27, 1998. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of May 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(ix) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. If an Event of Loss described in any of clauses (i) (A), (iii), (iv) or (v) above shall occur, Lessor may elect, within 30 days following the date upon which such Event of Loss is deemed to have occurred, to waive such Event of Loss and the consequences thereof. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. FSC. Global Capital Solutions Ltd., a Barbados corporation. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes or Expenses imposed against the Indenture Trustee which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of May 1, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity or the Owner Participant) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. McDonnell Douglas Corporation, a Maryland corporation. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than (i) a citizen or resident of the United States, as defined in Section 7701(a)(30) of the Code, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or therein, or (iii) any estate or trust that is subject to United States federal income taxation regardless of the source of its income. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on May 27, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136036. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136037. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on May 27, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessee and the Owner Participant as it was originally executed on May 27, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on May 27, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Bankmont Financial Corp., a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Article 5 of the Trust Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's (i) nominal after-tax yield and aggregate after-tax cash flow during the Basic Term and (ii) nominal after-tax yield and aggregate after-tax cash flow assumed to be realized through the date on which the option under Section 4.02(a)(F) of the Lease may be exercised, in each case, utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement thereof in accordance with the Lease, which may be removed therefrom. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Price. Has the meaning specified in Ancillary Agreement I. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 27, 2020 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, with respect to the Owner Participant, the president or any vice president with direct responsibility for the transactions contemplated by the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease under the heading "Stipulated Loss Value Date." Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after July 15, 2006 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2011 and January 15, 2014, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the fifth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. SCHEDULE III DESCRIPTION OF ORIGINAL INDENTURE Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee under Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between BMO Leasing (U.S.), Inc., as Owner Participant and State Street Bank and Trust Company of Connecticut, National Association, and First Security Bank, National Association, as indenture trustee, recorded by the Federal Aviation Administration on June 1, 1998 and assigned Conveyance No. X136036, as supplemented by the following described instrument: FAA FAA Date of Recording Conveyance Instrument Instrument Date Number - ---------- ---------- --------- ---------- Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) 05/27/98 06/01/98 X136036 DESCRIPTION OF AIRCRAFT One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48505 and U.S. Registration No. N590FE and three (3) General Electric CF6-80C2-D1F aircraft engines bearing manufacturer's serial numbers 702-819, 702-315 and 702-302 - ------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48791, REGISTRATION NO. N620FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates........................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 61 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months.................................................. 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Bills of Sale, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to March 15, 1999. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N620FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) - ------------ (1) This recital is to be included only in the first Indenture Supplement. WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the (1)This recital is to be included only in the first Indenture Supplement. (2)This recital is not to be included in the first Indenture Supplement. Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- --------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N620FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. - -------------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N620FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N620FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount
Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ---------------------
SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount ---------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2022 January 15, 2019 January 15, 2016 - ----------------------------------------------------------------------------------------- July 15, 1999 $ 500,303 $ 484,468 $ 870,674 January 15, 2000 792,277 0 0 January 15, 2001 1,292,580 484,717 182,154 January 15, 2002 1,292,580 484,718 545,925 January 15, 2003 1,292,580 484,717 710,050 January 15, 2004 1,292,580 484,718 1,061,070 January 15, 2005 1,292,580 484,717 1,079,826 January 15, 2006 1,292,580 484,718 1,123,627 January 15, 2007 1,292,580 1,508,138 622,115 January 15, 2008 1,292,580 2,212,658 0 January 15, 2009 1,292,580 2,217,752 0 January 15, 2010 2,200,748 26,178 556,459 January 15, 2011 2,917,182 0 0 January 15, 2012 3,057,594 0 0 January 15, 2013 872,536 0 1,959,394 January 15, 2014 0 0 2,533,112 January 15, 2015 0 0 2,834,457 January 15, 2016 0 0 2,678,137 January 15, 2017 3,976,257 0 0 January 15, 2018 2,173,329 2,160,676 0 January 15, 2019 0 4,638,825 0 January 15, 2020 4,963,747 0 0 January 15, 2021 5,307,977 0 0 January 15, 2022 4,690,830 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N620FE and Manufacturer's serial number 48791, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N620FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N620FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. June 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N620FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48792, REGISTRATION NO. N621FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page Initial Recitals........................................................... 1 Granting Clause............................................................ 2 Habendum Clause............................................................ 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates............................................. 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 61 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers...... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: ------------------- WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Bills of Sale, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to June 15, 1999. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By -------------------------------------------- Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By -------------------------------------------- Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N621FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : ------------------- WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By --------------------------------------------- Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N621FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) - ------------ (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N621FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By --------------------------------------------- Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N621FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By --------------------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount ---------------- Series [_] Sinking Fund Certificates with a Redemption Date Maturity of --------------- [ ] --------------- SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount ---------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2022 January 15, 2019 January 15, 2016 - ----------------------------------------------------------------------------------------------- July 15, 1999 $ 514,874 $ 487,435 $ 1,396,184 January 15, 2000 786,286 0 0 January 15, 2001 1,301,160 487,935 23,767 January 15, 2002 1,301,160 487,935 519,588 January 15, 2003 1,301,160 487,935 682,623 January 15, 2004 1,301,160 487,935 1,033,725 January 15, 2005 1,301,160 487,935 1,050,117 January 15, 2006 1,301,160 487,935 1,091,226 January 15, 2007 1,301,160 2,101,772 0 January 15, 2008 1,301,160 2,180,792 0 January 15, 2009 1,395,322 1,502,351 663,809 January 15, 2010 2,775,242 0 0 January 15, 2011 2,900,680 0 0 January 15, 2012 3,041,302 0 0 January 15, 2013 296,734 0 2,638,194 January 15, 2014 0 0 2,496,698 January 15, 2015 0 0 2,818,665 January 15, 2016 0 0 2,749,404 January 15, 2017 3,253,644 787,001 0 January 15, 2018 2,671,391 1,650,998 0 January 15, 2019 0 4,626,041 0 January 15, 2020 4,950,068 0 0 January 15, 2021 5,293,349 0 0 January 15, 2022 5,083,828 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N621FE and Manufacturer's serial number 48792, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N621FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N621FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N621FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2015 or January 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48794, REGISTRATION NO. N623FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest............. 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates........................................... 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements.................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date.................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates......................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee................................................ 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents.............................................. 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price....................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits.......................................... 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates.............................. 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default................. 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof................................................ 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc....................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc....................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements........................................... 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 61 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates.......................................... 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding................................ 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor.............................. 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee......................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures............................................ 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement..................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................. 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates............................... 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months....... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding............................................... 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................. 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease............................................. 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein.................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Bills of Sale, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to June 15, 1999. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N623FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) Whereas, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the (1)This recital is to be included only in the first Indenture Supplement. (2)This recital is not to be included in the first Indenture Supplement. Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N623FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N623FE) to be duly executed in its corporate name by its officer thereunto duly authorized. - ---------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N623FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] --------------------- SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount --------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2022 January 15, 2019 January 15, 2016 July 15, 1999 $ 514,874 $ 487,435 $ 1,396,184 January 15, 2000 786,286 0 0 January 15, 2001 1,301,160 487,935 23,767 January 15, 2002 1,301,160 487,935 519,588 January 15, 2003 1,301,160 487,935 682,623 January 15, 2004 1,301,160 487,935 1,033,725 January 15, 2005 1,301,160 487,935 1,050,117 January 15, 2006 1,301,160 487,935 1,091,226 January 15, 2007 1,301,160 2,101,772 0 January 15, 2008 1,301,160 2,180,792 0 January 15, 2009 1,395,322 1,502,351 663,809 January 15, 2010 2,775,242 0 0 January 15, 2011 2,900,680 0 0 January 15, 2012 3,041,302 0 0 January 15, 2013 296,734 0 2,638,194 January 15, 2014 0 0 2,496,698 January 15, 2015 0 0 2,818,665 January 15, 2016 0 0 2,749,404 January 15, 2017 3,253,644 787,001 0 January 15, 2018 2,671,391 1,650,998 0 January 15, 2019 0 4,626,041 0 January 15, 2020 4,950,068 0 0 January 15, 2021 5,293,349 0 0 January 15, 2022 5,083,828 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N623FE and Manufacturer's serial number 48794, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N623FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N623FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N623FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) Dated as of June 1, 1998 Amended and Restated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 789, REGISTRATION NO. N675FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 9 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES Section 2.01. Authentication and Delivery of Certificates.............. 9 Section 2.02. Execution of Certificates................................ 9 Section 2.03. Certificate of Authentication............................ 10 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 10 Section 2.05. Payments from Trust Indenture Estate Only................ 12 Section 2.06. Registration, Transfer and Exchange...................... 13 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 14 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 15 Section 2.09. Temporary Certificates................................... 16 Section 2.10. Termination of Interest in Trust Indenture Estate........ 16 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 16 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 17 Section 2.13. Subordination............................................ 17 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 17 Section 3.02. Offices for Payments, etc................................ 18 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 18 Section 3.04. Paying Agents............................................ 18 Section 3.05. Covenants of SSB and the Owner Trustee................... 19 Section 3.06. [Reserved]............................................... 19 Section 3.07. Disposal of Trust Indenture Estate....................... 20 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 20 Section 3.09. Further Assurances; Financing Statements................. 20 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 21 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 21 Section 5.02. Event of Loss and Replacement; Prepayment................ 22 Section 5.03. Payment After Indenture Event of Default, etc............ 23 Section 5.04. Certain Payments......................................... 25 Section 5.05. Other Payments........................................... 26 Section 5.06. Payments to Owner Trustee................................ 26 Section 5.07. Application of Payments.................................. 26 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 27 Section 5.09. Withholding Taxes........................................ 28 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 28 Section 6.02. Prepayment of Certificates............................... 28 Section 6.03. Notice of Prepayment to Holders.......................... 30 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 31 Section 6.05. Certificates Payable on Prepayment Date.................. 31 Section 6.06. Mandatory Sinking Fund Redemption........................ 31 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 32 Section 7.02. Remedies................................................. 34 Section 7.03. Return of Aircraft, etc.................................. 36 Section 7.04. Indenture Trustee May Prove Debt......................... 39 Section 7.05. Remedies Cumulative...................................... 40 Section 7.06. Suits for Enforcement.................................... 41 Section 7.07. Discontinuance of Proceedings............................ 41 Section 7.08. Limitations on Suits by Holders.......................... 41 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 42 Section 7.10. Control by Holders....................................... 42 Section 7.11. Waiver of Past Indenture Default......................... 43 Section 7.12. Notice of Indenture Default.............................. 43 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 43 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates......................................... 47 Section 8.03. Certain Rights of Owner Participant...................... 48 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 50 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 50 Section 9.03. Certain Rights of the Indenture Trustee.................. 52 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof......................................... 53 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 53 Section 9.06. Moneys Held by Indenture Trustee......................... 54 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 54 Section 9.08. Replacement Airframes and Replacement Engines............ 54 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 57 Section 9.10. Effect of Replacement.................................... 58 Section 9.11. Compensation............................................. 58 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 58 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 59 Section 10.03. Holders to Be Treated as Owners......................... 59 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding......................................... 59 Section 10.05. Right of Revocation of Action Taken..................... 60 Section 10.06. ERISA................................................... 60 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 62 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 62 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 63 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 64 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 64 Section 12.06. Appointment of Separate Trustees........................ 65 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 67 Section 13.02. Supplemental Indentures With Consent of Holders......... 69 Section 13.03. Effect of Supplemental Indenture........................ 70 Section 13.04. Documents to Be Given to Indenture Trustee.............. 70 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 70 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 70 Section 13.07. Notices to Liquidity Providers.......................... 71 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 71 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 72 Section 14.03. Repayment of Moneys Held by Paying Agent................ 72 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 73 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 73 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 73 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 73 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 74 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease......................................... 74 Section 15.06. Notices................................................. 74 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 75 Section 15.08. Severability............................................ 76 Section 15.09. No Oral Modifications or Continuing Waivers............. 76 Section 15.10. Successors and Assigns.................................. 76 Section 15.11. Headings................................................ 76 Section 15.12. Normal Commercial Relations............................. 76 Section 15.13. Governing Law; Counterparts............................. 77 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions Schedule III -- Description of Original Indenture; Description of Aircraft TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (this "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and SSB entered into the Original Trust Agreement whereby, among other things, the Owner Trustee declared a certain trust for the use and benefit of the Owner Participant, subject, however, to the Lien of the Original Indenture; WHEREAS, the Owner Trustee and the Indenture Trustee entered into the Original Indenture for the benefit and security of the Original Loan Participant and pursuant to which the Owner Trustee issued to the Original Loan Participant the Original Loan Certificates as evidence of the loan made by the Original Loan Participant to the Owner Trustee, the proceeds of which were used by the Owner Trustee to pay a portion of the Purchase Price for the Aircraft; WHEREAS, the Original Indenture with respect to the Aircraft (as such Aircraft is more particularly described in Schedule III attached hereto) was recorded by the FAA and assigned a Conveyance Number as described on Schedule III attached hereto; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the parties hereto desire to refinance the Original Loan Certificates with the proceeds of the Certificates to be issued hereunder; WHEREAS, in connection with the refinancing of the Original Loan Certificates, the parties hereto desire to amend and restate the Original Indenture in its entirety as this Indenture sets forth, in order to provide, among other things, (i) for the issuance by the Owner Trustee of the Certificates, as provided in the Participation Agreement, and (ii) for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, among other things, of certain of the Owner Trustee's right, title and interest in and to the Aircraft, the Lease and payments and other amounts received hereunder or thereunder in accordance with the terms hereof (other than Excepted Payments), as security for the Owner Trustee's obligations to the Holders and for the ratable benefit and security of such Holders; WHEREAS, the Owner Participant and SSB, prior to the execution and delivery of this Indenture, entered into the Trust Agreement whereby the Original Trust Agreement was amended and restated and pursuant to which, among other things, the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree that such Original Indenture be and the same is hereby amended and restated to read in its entirety as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) All moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder; (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain or otherwise demand, sue for or receive and enforce the payment of such Excepted Payments, (B) to exercise any election or option or make any decision or determination or to give or receive any notice (including notice of Default), consent, waiver or approval in respect of any such Excepted Payment, (C) to adjust (and make any decision or determination or give any notice or consent with respect to) Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the FPO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (D) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of any portion of Basic Rent constituting an Excepted Payment, any action changing the manner by which such Basic Rent is to be paid), (E) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft pursuant to Article 10 of the Lease, (F) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (G) to exercise all other rights of the Lessor under Articles 4 and 10 of the Lease with respect to the retention or purchase by the Lessee or the Lessor of the Aircraft or the exercise by the Lessee of the Lessee's renewal or purchase options, (H) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor", (I) to approve appraisers, lawyers and other professionals and receive notices, certificates, reports, filings, opinions and other documents, in each case with respect to matters relating to the Owner Participant's tax position, (J) to approve any accountants to be used in the verification of any Rent adjustment, and (K) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) subject to the last sentence of this clause (a), (A) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee (or, if an Indenture Event of Default that is also an Event of Default shall have occurred and be continuing, acting jointly with and not to the exclusion of the Indenture Trustee), to exercise all rights, elections and options of the Lessor in connection with the return of the Aircraft under Article 12 of the Lease (but not Article 17 thereof, it being understood that the Indenture Trustee shall have the exclusive right to exercise remedies pursuant to such Article 17, including in respect of any related return of the Aircraft pursuant to Article 12 of the Lease), including the right to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee and to exercise all rights, elections and options of the Lessor in connection with the return of the Aircraft pursuant to the express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; (iv) subject to the last sentence of this clause (a), at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft; and (v) at all times the Owner Trustee and the Owner Participant shall have the rights granted to them under Articles VI, VIII and X and Section 7.02 hereof. Notwithstanding the foregoing, but subject always to the provisions of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) (other than with respect to Excepted Payments) declare the Lease to be in default under Article 17 thereof or any statute (including, without limitation, Article 2-A of the UCC) and (B) subject only to the provisions of this Indenture, (other than in connection with Excepted Payments) exercise the remedies set forth in such Article 17 of the Lease any statute (including without limitation Article 2-A of the UCC), at law and in Article 7 hereof. (b) The foregoing provisions in paragraph (a) above shall be equally applicable to all rights of the Indenture Trustee in respect of Ancillary Agreement I and Ancillary Agreement II, whether such rights are granted directly to the Indenture Trustee under such agreements or are granted under the Granting Clause of this Indenture. (c) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture and the rights of the Owner Trustee and the Owner Participant under this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will, at the expense of the Lessee, promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect and shall not have been terminated pursuant to Section 14.01 hereof, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, enter into an agreement amending or supplementing any of the Indenture Documents, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Indenture Documents, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Indenture Documents, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity (subject to Section 15.01(d) of the Participation Agreement) and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Refunding Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof in immediately available funds prior to 10:30 A.M. (New York time) on the due date thereof and the Indenture Trustee shall remit all such amounts received by it to the Holders at such account or accounts at such financial institution or institutions as the Holders shall have designated to the Indenture Trustee in writing, in immediately available funds, such payment to be made if the payment was received prior to 10:30 A.M. New York time by the Indenture Trustee on any Business Day, by 12:00 noon New York time on such Business Day; otherwise, the Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New York time on the next succeeding Business Day; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof (but only to the extent actually received by the Indenture Trustee) and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof but only to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity, principal amount and interest rate and in authorized denominations for an equal aggregate principal amount; provided, that such Certificate being transferred shall be cancelled in accordance with Section 2.08 hereof simultaneously with the issuance of the new Certificate. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, principal amount and interest rate as the Certificate being replaced, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to hold each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses incurred in connection therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to hold each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except for any recourse obligations of the Owner Participant or the Owner Trustee in its individual capacity with respect to matters arising out of events occurring prior to such assumption). Section 2.13. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.13 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.13(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.13, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice from an insurer or an insurance broker received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved] Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by AVSA, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB and the Indenture Trustee made under this Indenture or in the Participation Agreement or of the Owner Participant made under the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, at the expense of the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than ten (10) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent and any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof shall be distributed by the Indenture Trustee no later than the time herein provided in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss (x) with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that a Payment Default, Bankruptcy Default or an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Payment Default, Bankruptcy Default or Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it or any investment sold by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Lessee, unless the Lessee notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the amounts the Lessee shall have so paid in respect of any such Tax shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) At the option of the Owner Trustee with the prior written consent of the Lessee and the Owner Participant upon not less than 25 days' prior written notice. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) (i) if such prepayment is made under any provision of Section 6.02 hereof on or after the applicable Premium Termination Date, or (ii) if such prepayment is made prior to the applicable Premium Termination Date pursuant to Section 6.02(a)(i) or 6.02(a)(iii) above (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vi) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if, pursuant to Section 4.02(a) of the Lease, the Lessee revokes its notice of election to purchase, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Any notice of prepayment given by the Owner Trustee may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iii) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or the Owner Participant Guarantor or the Owner Trustee Guarantor, in any Operative Agreement or in any certificate of SSB, the Owner Trustee, the Owner Participant, or the Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders and if such misrepresentation is capable of being corrected as of a subsequent date and if such correction is being sought diligently, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by a Majority in Interest of Holders; or (B) any (x) covenant made by the Owner Trustee in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) or 7.12 of the Participation Agreement shall be breached in any respect, (y) covenant made by the Owner Participant in Section 7.02(c) or the last sentence of Section 7.13 of the Participation Agreement shall be breached in any respect or (z) other covenant made by the Owner Trustee, in its individual capacity or as Owner Trustee, or by the Owner Trustee Guarantor, or by the Owner Participant or the Owner Participant Guarantor in any Operative Agreement shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (iv) the Owner Trustee, the Lessor's Estate, the Owner Trustee Guarantor, the Owner Participant or the Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (v) an order for relief shall be entered in respect of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, and such petition shall not be dismissed within 60 days, or if, without the consent or acquiescence of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Owner Trustee Guarantor or the Owner Participant or the Owner Participant Guarantor or the Lessor's Estate, as the case may be, and such order shall not be dismissed within 60 days; or (vii) the Owner Trustee Guaranty or the Owner Participant Guaranty shall cease to be a valid and enforceable obligation of the Owner Trustee Guarantor or the Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee and the Owner Participant such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may (subject to the provisions of the next succeeding paragraph) take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may (subject to the provisions of the next succeeding paragraph) exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the significant remedies under Article 17 of the Lease (as the Indenture Trustee determines in its sole discretion) for the purpose of recovering the Aircraft. It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation of law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code plus any extension consented to by the Indenture Trustee or the Holders of Certificates of such period as permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease pursuant to Section 365 or 1110 of the Bankruptcy Code and no Event of Default (other than as specified in Section 16.01(e), (f) or (g) of the Lease, or other Event of Default in respect of which the 30-day period referred to in clause (a)(1)(B)(ii)(I) of Section 1110 of the Bankruptcy Code shall not yet have expired) shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (iv), (v) or (vi) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee, the Owner Participant and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Participant and the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) Subject to Section 7.02 hereof, if an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction to the highest bidder, with or without demand, advertisement or notice, except that in respect of any private sale 30 days prior written notice by registered mail to the Owner Trustee and the Owner Participant will be provided, for cash or, with the consent of the Owner Trustee and the Owner Participant, credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in exercising reasonable commercial discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, and subject to Section 7.02 hereof, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice that an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that except in the case of a default in the payment of the principal of or interest on any Certificate, under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof and the provisions of paragraph (a) immediately following the Granting Clause hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the Lessor and the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (except in respect of the Term, if the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of any portion of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not materially adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Article 6 and Section 10.01(b) (insofar as such Article 6 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01 and 17.11 and Articles 8 and 9 (insofar as such Articles relate to the Indenture Trustee; it being understood that only the Indenture Trustee's consent in respect thereof need be obtained) and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable for the account of the Holders (subject in any event to Section 3.05 of the Lease) with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder and (ii) to grant any consent requested under the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable (except as provided below) and shall designate a Prepayment Date which shall be a Business Day which shall be not less than 15 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price (determined in accordance with Section 6.02(b) hereof) of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable (except as provided below) and shall designate a date which shall be a Business Day which shall be not less than 15 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above (but not if such purchase is pursuant to clause (a)(i) above), plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt by the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. (c) Any election to prepay or purchase the Certificates under this Section 8.02 shall be irrevocable, provided that if on the specified date for prepayment or purchase, the Event of Default giving rise to such election shall no longer be continuing under the Lease such election shall be deemed to be automatically withdrawn. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after the Owner Participant's receipt of written notice of such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law or equity against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after the Owner Participant's receipt of the written notice of such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law or in equity against the Lessee for the payment of such amount or taking appropriate action in a pending action at law or in equity against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee in its individual capacity hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. So long as an Indenture Event of Default has occurred and has not been cured or waived, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee agrees that it will execute and the Owner Trustee agrees that it will, at the expense of the Lessee, file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Indenture Trustee's Liens on any part of the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease and will otherwise conform to the requirements set forth in the definition of "Replacement Engine"; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee shall deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee, SSB or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture and any taxes excluded from the Lessee's indemnity obligation under Section 8.01(b) of the Participation Agreement), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's general indemnity or general tax indemnity to the Indenture Trustee under said Article; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, in form and substance reasonably satisfactory to the Owner Trustee, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be liable either personally or in its capacity as such trustee, by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; and (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each and every Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee in accordance with the terms and conditions of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except in the case of (c) above as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Upon termination of this Indenture pursuant to Article XIV hereof, the Indenture Trustee in connection with the satisfaction of the Indenture shall return to the Owner Trustee all property (and related documents and instruments) constituting or evidencing the Trust Indenture Estate. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371 (with a copy to the Owner Participant at the address provided for notice pursuant to Section 14.01 of the Participation Agreement), (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N675FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 (herein called the "Original Indenture") between the Owner Trustee and First Security Bank, National Association, as Indenture Trustee (herein called the "Indenture Trustee"), provides for the execution and delivery of a supplement thereto substantially in the form hereof which shall particularly describe the Aircraft (such term and other defined terms in the Indenture being used herein with the same meanings) and any Replacement Airframe or Replacement Engine included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft, Replacement Airframe or Replacement Engine, as the case may be, to the Indenture Trustee. WHEREAS, the Original Indenture dated as of June 1, 1998 which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998 (the Original Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code on June 22, 1998 as one document and have been assigned Conveyance No. BB27401. WHEREAS, the Original Indenture, as amended and restated by the Trust Indenture and Security Agreement dated as of June 15, 1998 (herein called the "Indenture"), was duly recorded pursuant to Subtitle VII of Title 49 of the United States Code on ______________ and assigned Conveyance No. ________; NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ --------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- --------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N675FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 SERIES ___ Interest Rate Maturity State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 between the Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose in immediately available funds prior to 10:30 A.M. (New York time) on the due date thereof and the Indenture Trustee shall remit all such amounts received by it to the Holders at such account or accounts at such financial institution or institutions as the Holders shall have designated to the Indenture Trustee in writing, in immediately available funds, such payment to be made if the payment was received prior to 10:30 A.M. New York time by the Indenture Trustee on any Business Day, by 12:00 noon New York time on such Business Day; otherwise, the Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New York time on the next succeeding Business Day; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee, respectively. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, State Street Bank and Trust Company of Connecticut, National Association nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of State Street Bank and Trust Company of Connecticut, National Association, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture but not in the case of clause (i) of Section 8.02(a) of the Indenture) any Make-Whole Premium applicable to each Outstanding Certificate, plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee shall deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) - ------------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N675FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, 1998 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE) referred to in the within mentioned Indenture. Dated: ________, 1998 FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount
Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ---------------------
SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount -------------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2018 January 15, 2016 January 15, 2014 - ---------------------------------------------------------------------------------------------------- January 15, 1999 $ 0 $ 0 $ 345,099 July 15, 1999 1,008,512 377,942 160,157 July 15, 2000 1,008,912 378,342 504,456 July 15, 2001 1,008,912 378,342 504,456 July 15, 2002 1,008,912 378,342 504,456 July 15, 2003 1,008,912 378,342 504,456 July 15, 2004 1,008,912 378,342 504,456 July 15, 2005 1,008,912 378,342 504,456 July 15, 2006 1,008,912 378,342 504,456 July 15, 2007 1,008,912 378,342 504,456 January 15, 2008 0 0 1,375,980 July 15, 2008 1,008,912 378,342 0 January 15, 2009 0 378,342 358,641 July 15, 2009 1,008,912 0 0 January 15, 2010 1,008,912 378,342 1,413,913 January 15, 2011 1,008,912 378,342 1,410,348 January 15, 2012 1,008,912 378,342 2,369,988 January 15, 2013 1,008,912 378,342 2,797,911 January 15, 2014 1,008,912 1,587,415 2,548,315 January 15, 2015 1,008,912 4,501,363 0 January 15, 2016 5,049,408 847,492 0 January 15, 2017 6,307,497 0 0 January 15, 2018 5,121,991 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment to be received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment to be received. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreement II. The Ancillary Agreement II (Federal Express Corporation Trust No. N675FE), dated the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Assignment and Assumption Agreement. Any agreement delivered in compliance with Section 7.03(d) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 18, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Stamford, Connecticut, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. June 18, 1998. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(xii) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 60 days due to theft or disappearance or such longer period, not to exceed 180 days from the end of such initial 60-day period, if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such theft or disappearance constitutes an Event of Loss pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twenty-four (24) consecutive months or until the end of the Term, if earlier. The date of such Event of Loss shall be (s) the 61st day or the 241st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term or the Lessee's abandonment of diligent efforts to recover such property, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 12 month or 24 month period, referred to in clause (iv) above (or if earlier, the end of the Term or abandonment of the Lessee's efforts to restore the normal use of the Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity, expense, reimbursement or other payments paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any other Operative Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with Section 13.05 of the Lease but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any purchase price paid to the Owner Participant for its interest in the Trust Estate pursuant to Section 7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vi) above and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (v) and (vii) above (except with respect to interest attributable to payments referred to in clause (vi) above). Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming the Aircraft (or other property) is unencumbered by the Lease. In such determination, except for purposes of Section 17.01 of the Lease (when it shall be determined based upon the actual condition and location of the Aircraft), it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. French Pledge Agreement. The French Pledge Agreement dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity in respect of which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant, the Original Loan Participants or any other Holder or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to the Original Loan Participants or any other Holder, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof and which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which are severable from the Aircraft in accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of the Lease and the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, any Assignment and Assumption Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on June 18, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27401. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27402. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on June 18, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessee and the Owner Participant as it was originally executed on June 18, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on June 18, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Philip Morris Capital Corporation, a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 7.03(d) of the Participation Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages, as the case may be, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement II. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Regulatory Change. Any change after June 18, 1998 in Federal, state or foreign law or regulations or the adoption or making after such date of any interpretation, directive or request applying to a class of financial institutions including any Certificate Holder of or under any Federal, state or foreign law or regulation (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 18, 2021 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of equal or greater value, airworthiness, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Department, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Stipulated Loss Value is to be calculated with reference to any such date; provided that if amounts in respect of Stipulated Loss Value are payable under the Operative Agreements after the Stipulated Loss Determination Date in respect of which such Stipulated Loss Value was determined, the Lessor shall be compensated during the period from the Stipulated Loss Determination Date to such payment date in accordance with the provisions of the Operative Agreements. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, FPO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the seventh anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Termination Value is to be calculated with reference to any such date; provided that if amounts in respect of Termination Value are payable under the Operative Agreements after the Termination Date in respect of which such Termination Value was determined, the Lessor shall be compensated during the period from the Termination Date to such payment date in accordance with the provisions of the Operative Agreements. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III DESCRIPTION OF ORIGINAL INDENTURE Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee under Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between PMCC Leasing Corporation, as Owner Participant and State Street Bank and Trust Company of Connecticut, National Association, and First Security Bank, National Association, as indenture trustee, recorded by the Federal Aviation Administration on June 22, 1998 and assigned Conveyance No. BB27401 as supplemented by the following described instrument: FAA FAA Date of Recording Conveyance Instrument Instrument Date Number - ---------- ---------- --------- ---------- Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) 06/18/98 06/22/98 BB27401 DESCRIPTION OF AIRCRAFT One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 789 and U.S. Registration No. N675FE and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers 705-261 and 705-262 - ------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 790, REGISTRATION NO. N676FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account.................................................. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates........................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof......................................... 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................ 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to July 15, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vii) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N676FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. (1)WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document. - ----------- (1)This recital is to be included only in the first Indenture Supplement. (2)Whereas, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________. - ------------ (2)This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N676FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.* - ------------ (1) To be inserted in the case of a Series B Certificate. * To be inserted for each Certificate other than any Series A Certificate. [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------ (2) To be inserted in the case of a Series C Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N676FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N676FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ------------------- SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount -------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2021 January 15, 2019 January 15, 2016 - ------------------------------------------------------------------------------------------------ January 15, 1999 $ 0 $ 1,484,985 $ 1,553,721 January 15, 2000 592,875 368,173 0 January 15, 2001 1,011,004 17,121 0 January 15, 2002 1,011,004 88,682 0 January 15, 2003 1,011,004 379,126 880,629 January 15, 2004 1,011,004 379,126 1,186,499 January 15, 2005 1,011,004 379,126 841,896 January 15, 2006 1,011,004 379,126 284,964 January 15, 2007 1,011,004 379,126 283,929 January 15, 2008 1,011,004 379,126 276,275 January 15, 2009 1,011,004 444,732 0 January 15, 2010 1,011,004 317,382 0 January 15, 2011 1,011,004 375,266 0 January 15, 2012 1,011,004 379,126 53,131 January 15, 2013 1,011,004 379,126 1,337,962 January 15, 2014 1,011,004 379,126 2,335,410 January 15, 2015 1,011,004 379,126 2,602,626 January 15, 2016 1,011,004 379,126 2,935,958 January 15, 2017 1,011,004 3,575,165 0 January 15, 2018 2,660,347 2,236,383 0 January 15, 2019 5,236,144 1,725 0 January 15, 2020 5,601,111 0 0 January 15, 2021 993,455 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N676FE and Manufacturer's serial number 790, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N676FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on July 15, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N676FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. October 13, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N676FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 791, REGISTRATION NO. N677FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page Initial Recitals........................................................... 1 Granting Clause............................................................ 2 Habendum Clause............................................................ 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates............................................. 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor............................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement........................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: ------------------- WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to August 26, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By ----------------------------------- Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------------- Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N677FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : ------------------- WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By ----------------------------------- Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N677FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------ (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N677FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By ----------------------------------- Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N677FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount ---------------- Series [_] Sinking Fund Certificates with a Redemption Date Maturity of --------------- [ ] ------------------ SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS
Principal Amount ---------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2021 January 15, 2019 January 15, 2016 - ------------------------------------------------------------------------------------------------- January 15, 1999 $ 131,697 $ 1,993,384 $ 913,461 January 15, 2000 1,011,559 0 0 January 15, 2001 1,012,843 69,101 0 January 15, 2002 1,012,843 196,772 0 January 15, 2003 1,012,843 380,139 966,604 January 15, 2004 1,012,843 380,139 1,269,105 January 15, 2005 1,012,843 380,139 1,271,158 January 15, 2006 1,012,843 380,139 391,375 January 15, 2007 1,012,843 380,139 516,999 January 15, 2008 1,012,843 380,139 183,943 January 15, 2009 1,012,843 380,139 0 January 15, 2010 1,012,843 380,139 383,390 January 15, 2011 1,012,843 380,139 60,636 January 15, 2012 1,012,843 380,139 121,097 January 15, 2013 1,012,843 380,139 184,620 January 15, 2014 1,012,843 380,139 2,138,981 January 15, 2015 1,012,843 380,139 2,681,449 January 15, 2016 1,012,843 380,139 3,032,182 January 15, 2017 1,012,843 1,003,863 0 January 15, 2018 1,012,843 3,850,158 0 January 15, 2019 4,006,223 974,776 0 January 15, 2020 5,512,064 0 0 January 15, 2021 3,986,283 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N677FE and Manufacturer's serial number 791, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N677FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on August 26, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N677FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. November 24, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N677FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 792, REGISTRATION NO. N678FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page Initial Recitals........................................................... 1 Granting Clause............................................................ 2 Habendum Clause............................................................ 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates............................................. 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates......................................... 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: ------------------- WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to September 23, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By ----------------------------------------- Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------------------- Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N678FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : ------------------- WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. (1)WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document. (2)Whereas, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________. - ------------ (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By ----------------------------------------- Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N678FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------ (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N678FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By ----------------------------------------- Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N678FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount ---------------- Series [_] Sinking Fund Certificates with a Redemption Date Maturity of --------------- [ ] ------------------ SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS
Principal Amount ---------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2019 January 15, 2017 January 15, 2015 - ------------------------------------------------------------------------------------------------- January 15, 1999 $ 0 $ 349,730 January 15, 2000 24,001 $ 850,401 324,467 January 15, 2001 1,014,000 218,350 0 January 15, 2002 939,350 380,250 0 July 15, 2002 74,650 0 0 January 15, 2003 949,969 380,250 0 July 15, 2003 64,031 0 0 January 15, 2004 0 380,250 1,063,087 July 15, 2004 1,014,000 0 0 January 15, 2005 0 0 548,985 July 15, 2005 1,014,000 380,250 0 January 15, 2006 0 0 343,403 July 15, 2006 1,014,000 380,250 0 January 15, 2007 0 0 489,601 July 15, 2007 1,014,000 380,250 33,156 January 15, 2008 0 0 1,453,062 July 15, 2008 1,014,000 388,461 0 January 15, 2009 0 372,039 0 July 15, 2009 1,014,000 0 0 January 15, 2010 1,014,000 380,250 97,076 January 15, 2011 1,014,000 380,250 1,602,182 January 15, 2012 1,014,000 380,250 1,160,171 January 15, 2013 1,014,000 380,250 1,613,949 January 15, 2014 1,014,000 380,250 2,920,621 January 15, 2015 1,014,000 1,987,983 1,621,510 January 15, 2016 1,014,000 3,937,343 0 January 15, 2017 4,632,945 665,673 0 January 15, 2018 5,667,496 0 0 January 15, 2019 5,247,558 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N678FE and Manufacturer's serial number 792, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N678FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 23, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N678FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 22, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N678FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or July 15, 2018, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2017. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------- TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 793, REGISTRATION NO. N679FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals......................................................... 1 Granting Clause.......................................................... 2 Habendum Clause.......................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account.................................................. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates............................................. 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof......................................... 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement............. 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months.................................................. 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease............................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to October 22, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N679FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Tust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ----------- (1)This recital is to be included only in the first Indenture Supplement. (2)This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ --------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N679FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ----------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N679FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N679FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount
Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ---------------------
SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS
Principal Amount -------------------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2020 January 15, 2017 January 15, 2016 - --------------- ------------------------ ------------------------- -------------------- January 15, 1999 $ 0 $ 0 $ 219,920 January 15, 2000 576,001 818,250 0 July 15, 2000 0 0 401,814 January 15, 2001 1,014,000 415,375 1,772,625 January 15, 2002 1,014,000 345,125 0 January 15, 2003 1,014,000 380,250 59,946 January 15, 2004 1,014,000 380,250 161,902 January 15, 2005 1,014,000 380,250 402,006 January 15, 2006 1,014,000 380,250 393,210 January 15, 2007 1,014,000 380,250 398,307 January 15, 2008 1,014,000 380,250 0 January 15, 2009 1,014,000 388,029 273,505 January 15, 2010 1,014,000 372,471 0 January 15, 2011 1,014,000 380,250 1,019,143 January 15, 2012 1,014,000 380,250 959,171 January 15, 2013 1,014,000 380,250 943,715 January 15, 2014 1,014,000 752,954 2,226,407 January 15, 2015 1,014,000 3,263,287 0 January 15, 2016 1,014,000 241,815 3,326,329 January 15, 2017 1,521,066 3,093,444 0 January 15, 2018 4,689,080 0 0 January 15, 2019 5,557,029 0 0 January 15, 2020 4,794,824 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N679FE and Manufacturer's serial number 793, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N679FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on October 22, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N679FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. January 20, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N679FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 794, REGISTRATION NO. N680FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals.......................................................... 1 Granting Clause........................................................... 2 Habendum Clause........................................................... 6 ARTICLE I DEFINITIONS Section 1.01. Definitions................................................ 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates................ 8 Section 2.02. Execution of Certificates.................................. 8 Section 2.03. Certificate of Authentication.............................. 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest............................ 9 Section 2.05. Payments from Trust Indenture Estate Only.................. 11 Section 2.06. Registration, Transfer and Exchange........................ 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................... 13 Section 2.08. Cancellation of Certificates; Destruction Thereof.......... 14 Section 2.09. Temporary Certificates..................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate.......... 15 Section 2.11. Certificates in Respect of Replacement Aircraft............ 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements....................................... 15 Section 2.13. Establishment of Collateral Account........................ 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account... 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date........................ 17 Section 2.16. Cut-Off Date; Series C Prepayment Date..................... 18 Section 2.17. Subordination.............................................. 18 Section 2.18. Reoptimization............................................. 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates............................................. 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates................................ 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default......................................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement............. 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................... 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding...................................... 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease......................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to November 12, 1998. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By_____________________________________________ Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N680FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - -------------- (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By_____________________________________________ Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N680FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------- (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N680FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By _____________________________________________ Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N680FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ____________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount
Series [_] Sinking Fund Certificates with a Redemption Date Maturity of - --------------- [_______________] ---------------------
SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS Principal Amount ------------------------ Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2020 January 15, 2017 January 15, 2016 - --------------- ------------------------ ------------------------- --------------------- January 15, 1999 $ 0 $ 847 $ 2,353,730 July 15, 1999 0 359,530 0 January 15, 2000 376,189 991,791 0 January 15, 2001 1,013,747 183,839 0 January 15, 2002 1,013,747 267,406 0 January 15, 2003 1,013,747 356,897 0 January 15, 2004 1,013,747 380,478 72,317 January 15, 2005 1,013,747 380,478 310,314 January 15, 2006 1,013,747 380,478 290,723 January 15, 2007 1,013,747 380,478 248,734 January 15, 2008 1,013,747 466,692 0 January 15, 2009 1,013,747 307,900 0 January 15, 2010 1,013,747 366,842 0 January 15, 2011 1,013,747 380,478 1,130,212 January 15, 2012 1,013,747 380,478 1,615,585 January 15, 2013 1,013,747 380,478 2,359,947 January 15, 2014 1,013,747 380,478 2,629,235 January 15, 2015 1,013,747 784,982 2,513,244 January 15, 2016 1,013,747 3,293,129 311,959 January 15, 2017 1,986,333 2,897,321 0 January 15, 2018 5,285,965 0 0 January 15, 2019 5,653,532 0 0 January 15, 2020 3,632,029 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N680FE and Manufacturer's serial number 794, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N680FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on May 12, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N680FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. February 10, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N680FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 799, REGISTRATION NO. N681FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page Initial Recitals........................................................... 1 Granting Clause............................................................ 2 Habendum Clause............................................................ 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates........................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates......................................... 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers...... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: ------------------- WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to May 20, 1999. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By --------------------------------------- Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N681FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : ------------------- WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N681FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) - ------------ (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N681FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N681FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By --------------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount ---------------- Series [_] Sinking Fund Certificates with a Redemption Date Maturity of --------------- [ ] ------------------ SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS
Principal Amount ---------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2021 January 15, 2018 January 15, 2016 - ------------------------------------------------------------------------------------------------- July 15, 1999 $ 0 $ 905,414 $ 1,589,536 January 15, 2000 796,374 290,880 0 January 15, 2001 1,042,040 121,084 0 January 15, 2002 1,042,040 202,173 0 January 15, 2003 1,042,040 289,009 0 January 15, 2004 1,042,040 390,765 1,170,431 January 15, 2005 1,042,040 390,765 1,491,450 January 15, 2006 1,042,040 390,765 691,204 January 15, 2007 1,042,040 390,765 530,653 January 15, 2008 1,042,040 390,765 550,639 January 15, 2009 1,042,040 670,082 167,416 January 15, 2010 1,042,040 497,006 0 January 15, 2011 1,042,040 565,427 0 January 15, 2012 1,042,040 637,356 0 January 15, 2013 1,042,040 831,996 0 January 15, 2014 1,042,040 1,413,718 1,402,673 January 15, 2015 1,042,040 0 3,262,727 January 15, 2016 1,042,040 0 3,632,271 January 15, 2017 1,042,040 3,892,418 0 January 15, 2018 4,247,711 1,000,612 0 January 15, 2019 5,676,255 0 0 January 15, 2020 6,038,261 0 0 January 15, 2021 15,719 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N681FE and Manufacturer's serial number 799, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N681FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on November 20, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N681FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 18, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N681FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------ TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Owner Trustee, Owner Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Not in its Individual Capacity, but solely As Indenture Trustee, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 800, REGISTRATION NO. N682FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page Initial Recitals........................................................... 1 Granting Clause............................................................ 2 Habendum Clause............................................................ 6 ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................. 7 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates.............. 8 Section 2.02. Execution of Certificates................................ 8 Section 2.03. Certificate of Authentication............................ 8 Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest.......................... 9 Section 2.05. Payments from Trust Indenture Estate Only................ 11 Section 2.06. Registration, Transfer and Exchange...................... 12 Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates............................................. 13 Section 2.08. Cancellation of Certificates; Destruction Thereof........ 14 Section 2.09. Temporary Certificates................................... 14 Section 2.10. Termination of Interest in Trust Indenture Estate........ 15 Section 2.11. Certificates in Respect of Replacement Aircraft.......... 15 Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements..................................... 15 Section 2.13. Establishment of Collateral Account...................... 15 Section 2.14. Investment of Funds on Deposit in the Collateral Account. 16 Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date...................... 17 Section 2.16. Cut-Off Date; Series C Prepayment Date................... 18 Section 2.17. Subordination............................................ 18 Section 2.18. Reoptimization........................................... 19 Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates........................................... 19 ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest.... 20 Section 3.02. Offices for Payments, etc................................ 20 Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.................................................. 21 Section 3.04. Paying Agents............................................ 21 Section 3.05. Covenants of SSB and the Owner Trustee................... 21 Section 3.06. [Reserved]............................................... 22 Section 3.07. Disposal of Trust Indenture Estate....................... 22 Section 3.08. No Representations or Warranties as to Aircraft or Documents................................................ 22 Section 3.09. Further Assurances; Financing Statements................. 23 ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates.................. 23 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution.................................. 24 Section 5.02. Event of Loss and Replacement; Prepayment................ 25 Section 5.03. Payment After Indenture Event of Default, etc............ 26 Section 5.04. Certain Payments......................................... 28 Section 5.05. Other Payments........................................... 28 Section 5.06. Payments to Owner Trustee................................ 29 Section 5.07. Application of Payments.................................. 29 Section 5.08. Investment of Amounts Held by Indenture Trustee.......... 30 Section 5.09. Withholding Taxes........................................ 30 ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity.......................... 31 Section 6.02. Prepayment of Certificates............................... 31 Section 6.03. Notice of Prepayment to Holders.......................... 33 Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price.................................................... 33 Section 6.05. Certificates Payable on Prepayment Date.................. 34 Section 6.06. Mandatory Sinking Fund Redemption........................ 34 ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default............................... 35 Section 7.02. Remedies................................................. 37 Section 7.03. Return of Aircraft, etc.................................. 39 Section 7.04. Indenture Trustee May Prove Debt......................... 42 Section 7.05. Remedies Cumulative...................................... 44 Section 7.06. Suits for Enforcement.................................... 44 Section 7.07. Discontinuance of Proceedings............................ 44 Section 7.08. Limitations on Suits by Holders.......................... 45 Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits............................................ 45 Section 7.10. Control by Holders....................................... 45 Section 7.11. Waiver of Past Indenture Default......................... 46 Section 7.12. Notice of Indenture Default.............................. 46 Section 7.13. Waiver of Appraisement, etc.; Laws....................... 47 ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant.... 47 Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates......................................... 51 Section 8.03. Certain Rights of Owner Participant...................... 52 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts..................................... 54 Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default............................... 54 Section 9.03. Certain Rights of the Indenture Trustee.................. 56 Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof.................................................. 57 Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc......................................... 57 Section 9.06. Moneys Held by Indenture Trustee......................... 57 Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc......................................... 58 Section 9.08. Replacement Airframes and Replacement Engines............ 58 Section 9.09. Indenture and Security Agreement Supplement for Replacements............................................. 61 Section 9.10. Effect of Replacement.................................... 61 Section 9.11. Compensation............................................. 62 ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders..................... 62 Section 10.02. Proof of Execution of Instruments and of Holding of Certificates............................................ 62 Section 10.03. Holders to Be Treated as Owners......................... 63 Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding.................................. 63 Section 10.05. Right of Revocation of Action Taken..................... 64 Section 10.06. ERISA................................................... 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee....................... 66 Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor................................ 66 Section 12.03. Persons Eligible for Appointment as Indenture Trustee... 67 Section 12.04. Acceptance of Appointment by Successor Trustee.......... 67 Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee........................... 68 Section 12.06. Appointment of Separate Trustees........................ 69 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders...... 71 Section 13.02. Supplemental Indentures With Consent of Holders......... 72 Section 13.03. Effect of Supplemental Indenture........................ 74 Section 13.04. Documents to Be Given to Indenture Trustee.............. 74 Section 13.05. Notation on Certificates in Respect of Supplemental Indentures.............................................. 74 Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement....................... 74 Section 13.07. Notices to Liquidity Providers.......................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture............................................... 75 Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates................................. 76 Section 14.03. Repayment of Moneys Held by Paying Agent................ 76 Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months......... 76 ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting................................ 77 Section 15.02. No Legal Title to Trust Indenture Estate in Holders..... 77 Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding................................................. 77 Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers............................................... 77 Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease................................................... 78 Section 15.06. Notices................................................. 78 Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein...................... 79 Section 15.08. Severability............................................ 79 Section 15.09. No Oral Modifications or Continuing Waivers............. 80 Section 15.10. Successors and Assigns.................................. 80 Section 15.11. Headings................................................ 80 Section 15.12. Normal Commercial Relations............................. 80 Section 15.13. Governing Law; Counterparts............................. 80 Exhibit A -- Form of Indenture and Security Agreement Supplement Exhibit B -- Form of Certificate Schedule I -- Schedule of Principal Payments Schedule II -- Definitions TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) dated as of June 15, 1998 (the "Indenture"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise specifically set forth herein (when acting in such individual capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the Trust Agreement, as defined herein, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee hereunder (the "Indenture Trustee"). W I T N E S S E T H: ------------------- WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Initial Owner Participant and SSB have, immediately prior to the execution and delivery of this Indenture, entered into a Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of the date hereof (as amended or otherwise modified from time to time in accordance with the provisions thereof and of the Participation Agreement, the "Trust Agreement"), whereby, among other things, SSB has declared a certain trust for the use and benefit of the Initial Owner Participant, subject, however, to the Lien of this Indenture for the use and benefit of, and with the priority of payment to, the holders of the Certificates issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, the Owner Trustee desires by this Indenture, among other things (i) to provide for the issuance by the Owner Trustee of Certificates as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder of the Owner Trustee's right, title and interest in the Liquid Collateral and after the Delivery Date for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, of among other things, certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and the Indenture Documents and certain payments and other amounts (other than Excepted Payments) received hereunder or thereunder in accordance with the terms hereof, as security for, among other things, the Owner Trustee's obligations to the Certificate Holders and for the benefit and security of such Holders; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated, issued and delivered hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree as follows: GRANTING CLAUSE NOW, THEREFORE, in consideration of the mutual promises contained herein and to secure (i) the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all the Certificates from time to time outstanding under this Indenture and all other amounts due hereunder and (ii) the performance and observance by the Owner Trustee of all the agreements, covenants and provisions in this Indenture, in the Certificates, in the Participation Agreement and in the Lease contained for the benefit of the Holders of the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders (collectively the "Secured Obligations") and for the uses and purposes and subject to the terms and provisions of this Indenture, and in consideration of the premises and of the covenants in this Indenture and in the Certificates and of the purchase of the Certificates by their Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of this Indenture, the receipt and sufficiency of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a first priority security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and grant a first priority security interest in and confirm to the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders from time to time of the Certificates, a first priority security interest in and first mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges other than Excepted Payments, which collectively, excluding Excepted Payments but including all property specifically subjected to the Lien of this Indenture by the terms hereof, by any Indenture and Security Agreement Supplement or any mortgage supplemental to this Indenture, are included within the Trust Indenture Estate, subject always to the rights granted to the Owner Trustee or the Owner Participant hereunder and to the other terms and conditions of this Indenture: (1) The Airframe, as the same is more particularly described in the Indenture and Security Agreement Supplement and any airframe substituted in replacement thereof pursuant to the provisions of this Indenture; the Engines, as the same are more particularly described in the Indenture and Security Agreement Supplement, whether or not such Engines shall be installed in or attached to the Airframe or any other airframe, and any Replacement Engine therefor; and all Parts in respect of the Airframe and the Engines and all records, logs and other documents at any time maintained with respect to the foregoing property; (2) The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Event of Default; (3) The Purchase Agreement, the Purchase Agreement Assignment, the AVSA Consent and Agreement, the Consent and Agreement, the Consent and Guaranty, the GTA, the Engine Warranty Assignment and the Engine Consent, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Ancillary Agreements, the Letter of Credit and the Participation Agreement (to the extent of amounts payable to the Owner Trustee thereunder) (collectively, and together with the Lease, the Trust Agreement and the Certificates, the "Indenture Documents"), including all rights of the Owner Trustee to execute any election or option or to give or receive any notice, consent, waiver or approval under or in respect of any of the foregoing documents and instruments; (4) All the tolls, rents, issues, profits, products, revenues and other income (including sales proceeds) of the property subjected or required to be subjected to the Lien of this Indenture, and all of the estate, right, title and interest of the Owner Trustee in and to the same and every part of said property; (5) The Collateral Account, the Liquid Collateral and all other moneys and securities (including Permitted Investments) now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Agreement, except the Tax Indemnity Agreement, and held or required to be held by the Indenture Trustee hereunder (provided, that, in the event that the Delivery Date shall have occurred, the Collateral Account and the Liquid Collateral shall only secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) hereof); (6) All requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the terms of the Lease) and all insurance proceeds with respect to the Aircraft or any part thereof from insurance required to be maintained by the Lessee under Article 13 of the Lease, but excluding any insurance maintained by the Lessee and not required under Article 13 of the Lease; and (7) All proceeds of the foregoing. EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted Payments, including without limitation all right, title and interest of the Owner Participant in, to and under the Tax Indemnity Agreement and any moneys due or to become due under the Tax Indemnity Agreement and all rights to collect and enforce Excepted Payments and (ii) rights granted to or retained by the Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following provisions: (a) (i) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Owner Participant shall at all times retain the right, to the exclusion of the Indenture Trustee, (A) to Excepted Payments and to commence an action at law to obtain such Excepted Payments and (B) to adjust Basic Rent and the percentages relating to Stipulated Loss Value and Termination Value and the EBO Price as provided in Section 3.04 of the Lease and Section 15.01 of the Participation Agreement, (C) to exercise any election or option to make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case only to the extent relating to, Excepted Payments (except for, in respect of Basic Rent constituting an Excepted Payment, the manner by which such amount is paid), (D) to retain the rights of the "Lessor" with respect to solicitations of bids, and the election to retain the Aircraft, pursuant to Article 10 of the Lease, (E) to retain the right of "Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to Article 4 of the Lease, (F) to retain all rights with respect to insurance maintained for its own account which Section 13.05 of the Lease specifically confers on the "Lessor" and (G) to exercise, to the extent necessary to enable it to exercise its rights under Section 8.03 hereof, the rights of the "Lessor" under Section 17.04 of the Lease; (ii) whether or not an Indenture Event of Default shall occur and be continuing, the Owner Trustee and the Indenture Trustee shall each have the rights separately but not to the exclusion of the other (agreement of both required in the case of clause (E) below), (A) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel, copies of all documents and all information which the Lessee is permitted or required to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee pursuant to any other Operative Agreement, (B) to exercise inspection rights pursuant to Section 14.01 of the Lease (provided that if an Indenture Event of Default shall be continuing, no inspection right of the Owner Trustee shall interfere with the efforts of the Indenture Trustee to exercise remedies under the Lease or this Indenture), (C) to maintain separate insurance pursuant to Section 13.05 of the Lease and to retain all rights with respect to such insurance maintained for its own account, (D) to give any notice of default under Section 16.01 of the Lease and to declare the Lease in default in respect thereof, and (E) the right to consent to changes to the list of countries on Schedule III to the Participation Agreement; (iii) (A) so long as no Indenture Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, to the exclusion of the Indenture Trustee, to approve as satisfactory any accountants, engineers, appraisers or counsel to render services for or issue appraisals, reports, certificates or opinions to the Owner Trustee pursuant to express provisions of the Operative Agreements, and (B) so long as no Indenture Event of Default not constituting an Event of Default shall have occurred and be continuing (but subject to the provisions of Section 8.01 hereof), the Owner Trustee shall retain the right, jointly with the Indenture Trustee (agreement of both not being required), to further assurances and financial information from the Lessee pursuant to Section 19.01 of the Lease (other than the right to receive any funds to be delivered to the "Lessor" under the Lease (except funds delivered with respect to Excepted Payments) and under the Purchase Agreement; and (iv) at all times the Owner Trustee shall have the right as Lessor, but not to the exclusion of the Indenture Trustee, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance, maintenance, possession and use of the Aircraft. (b) The leasehold interest granted to the Lessee by the Lease shall not be subject to the security interest granted by this Indenture, and nothing in this Indenture shall affect the rights of the Lessee under the Lease so long as no Event of Default has occurred and is continuing. HABENDUM CLAUSE TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable benefit and security of the Holders from time to time of the Certificates, without any priority of any one Certificate over any other and for the uses and purposes and subject to the terms and conditions set forth in this Indenture. It is expressly agreed that anything contained in this Indenture to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it under any of those documents, all in accordance with and pursuant to the terms and provisions of those documents, and the Indenture Trustee and the Holders of the Certificates shall have no obligation or liability under the Indenture Documents by reason of or arising out of the assignment under this Indenture, nor shall the Indenture Trustee or the Holders of the Certificates be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to the Indenture Documents or, except as expressly provided in this Indenture, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise), subject to the terms and conditions of this Indenture, to ask, require, demand, receive, compound and give acquittance for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee, Stipulated Loss Value and Termination Value payments, insurance proceeds and any and all moneys and claims for moneys due and to become due under or arising out of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents (other than Excepted Payments), to endorse any checks or other instruments or orders in connection with the same and to file any claims, take any action or institute any proceeding which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease the Lessee is directed to make all payments of Rent (other than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee and all other amounts (other than Excepted Payments not constituting Basic Rent) which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee at such address in the United States of America as the Indenture Trustee shall specify for application as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding such provision, it shall have received any such amounts, promptly on receipt of any such payment, it will transfer to the Indenture Trustee any and all moneys from time to time received by the Owner Trustee constituting part of the Trust Indenture Estate for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under this Indenture, and (ii) any Excepted Payments not constituting Basic Rent. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers herein granted; provided, however, that the Owner Trustee shall have no obligation to execute and deliver or cause to be executed or delivered to the Indenture Trustee any such instrument or document if such execution and delivery would result in the imposition of additional liabilities on the Owner Trustee or the Owner Participant or would result in a burden on the Owner Participant's business activities, unless the Owner Trustee or the Owner Participant, as the case may be, is indemnified to its reasonable satisfaction against any losses, liabilities and expenses incurred in connection with such execution and delivery. The Owner Trustee does hereby warrant and represent that it has not assigned, pledged or otherwise disposed of, and hereby covenants that it will not assign or pledge or otherwise dispose of, so long as the assignment hereunder shall remain in effect, any of its right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that it will not, except in respect of Excepted Payments or otherwise as provided in or permitted by this Indenture, accept any payment from the Lessee or any sublessee, enter into an agreement amending or supplementing any of the Operative Agreements, execute any waiver or modification of, or consent under the terms of any of the Operative Agreements, settle or compromise any claim (other than claims in respect of Excepted Payments) against the Lessee arising under any of the Operative Agreements, or submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Operative Agreements, to arbitration thereunder. Concurrently with the delivery of this Indenture, the Owner Trustee has delivered to the Indenture Trustee executed counterparts of the Trust Agreement and the chattel paper original counterpart of the Lease. It is hereby further covenanted and agreed by and between the parties as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, capitalized terms utilized herein shall have the meanings set forth in Schedule II hereto for all purposes of this Indenture and shall be equally applicable to both the singular and plural forms of the terms defined. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT Section 2.01. Authentication and Delivery of Certificates. Forthwith upon the execution and delivery of this Indenture, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 hereof (except as otherwise provided in Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. Section 2.02. Execution of Certificates. The Certificates shall be signed on behalf of the Owner Trustee by an authorized officer of SSB. Such signatures may be the manual or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of SSB who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by SSB, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of SSB; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of SSB, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Certificates bearing the facsimile signatures of individuals who were authorized officers of SSB at the time such Certificates were issued shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the respective dates of such Certificates. Section 2.03. Certificate of Authentication. Only such Certificates as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. Section 2.04. Form and Terms of Certificates; Payments of Principal, Make-Whole Premium and Interest. The Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. Certificates may differ with respect to Maturity and as to other terms. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the Certificate Closing Date, shall be issued in three separate series consisting of Series A, Series B and Series C and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of original issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Notwithstanding the preceding paragraph, each Certificate shall bear interest at the Past Due Rate on any principal, interest and any other amount payable hereunder or under such Certificate, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. The principal of, and Make-Whole Premium, if any, and interest on, the Certificates shall be payable at the Corporate Trust Department of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the Indenture Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register. If any amount payable under the Certificates, or under this Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. The Holder at the close of business on any Record Date with respect to any Payment Date shall be entitled to receive the interest if any payable on such Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five (5) or more than fifteen (15) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than fifteen (15) days preceding such subsequent Record Date. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 5.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by the Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the Participation Agreement (it being acknowledged that the Lessee has been instructed to pay such amounts to the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity Provider by the Subordination Agent under each Liquidity Facility other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings and Final Drawings except to the extent included in Net Interest and Related Charges. As used in this Section, the Owner Trustee's pro rata share means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates), plus (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default under any Certificate issued under this Indenture a fraction, the numerator of which is the aggregate principal balance then outstanding of Certificates issued under this Indenture (other than the Series C Certificates) and the denominator of which is the aggregate principal balance then outstanding of all Certificates issued under this Indenture and the Related Indentures (other than the Series C Certificates) under which there exists a Payment Default or (y) at all other times, zero. As used in this Section, "Net Interest and Related Charges" means the sum of (i) the amount, if any, by which interest payable to each Liquidity Provider on any Interest Drawing and/or Final Drawing exceeds the amount which would be payable if such drawings bore interest at the weighted average Past Due Rate applicable to amounts in default on all Certificates plus (ii) any amounts payable under Section 3.01, Section 3.02, Section 3.03, Section 3.09 or Section 7.07 of each Liquidity Facility (or similar provisions of any replacement Liquidity Facility) which result from any Interest Drawing or Final Drawing. As used in this Section, a Payment Default when used in connection with a Certificate issued hereunder or a Certificate issued under any Related Indenture means a default in the payment of principal thereof or interest thereon (which default has not been cured), other than solely because of acceleration. Section 2.05. Payments from Trust Indenture Estate Only. All payments to be made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and from any other amounts of the type described in Section 5.01 hereof to the extent actually received by the Indenture Trustee and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate (and such other amounts) to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Trust Indenture Estate (and such other amounts of the type described in Section 5.01 hereof and Section 17.02(f) of the Participation Agreement to the extent actually received by the Indenture Trustee) to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of SSB, the Owner Trustee or the Indenture Trustee. SSB is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of SSB's gross negligence or willful misconduct, or as otherwise expressly provided herein or in the Participation Agreement. If (1) all or any part of the Lessor's Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal of or interest, Make-Whole Premium or other amounts payable on the Certificates, and (3) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee shall promptly refund to the Owner Participant such Recourse Amount. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under the Participation Agreement, or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 hereof a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable period of time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Series and Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Series and Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, prepayment or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 15.01 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge shall be levied for any such transaction. The Indenture Trustee shall not be required to exchange or register a transfer of any Certificates (a) for a period of fifteen (15) days immediately preceding the first mailing of notice of prepayment of such Certificates or (b) with respect to which notice of prepayment has been given pursuant to Section 6.03 hereof and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee in its discretion may execute, and upon the oral or written request of any officer of SSB, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. In the case of any Certificate so apparently destroyed, lost or stolen, the applicant for a substitute Certificate shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses connected therewith. In case any Certificate which has matured or is about to mature, or has been called for prepayment in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if the applicant of any Certificate so apparently destroyed, lost or stolen, for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as any of them may require to save each of them harmless and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.08. Cancellation of Certificates; Destruction Thereof. All Certificates surrendered for payment, prepayment, registration of transfer or exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a prepayment or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. Section 2.09. Temporary Certificates. Pending the preparation of definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of SSB, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02 hereof, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Series and Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. Section 2.10. Termination of Interest in Trust Indenture Estate. A Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal amount of and Make-Whole Premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder and under the other Operative Agreements shall have been paid in full. Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the execution and delivery of an Indenture and Security Agreement Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). Section 2.13. Establishment of Collateral Account. (a) The Indenture Trustee shall, pursuant to the Collateral Agreement, establish, or cause to be established, with State Street Bank and Trust Company, who shall represent and warrant that it is a financial intermediary (as defined in Section 8-313(4) of the Connecticut UCC), in its name as secured party hereunder an Eligible Deposit Account entitled "First Security Bank, National Association, as secured party under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, with the Owner Trustee referred to therein". (b) If at any time the Collateral Account ceases to be an Eligible Deposit Account, the Indenture Trustee shall within two (2) Business Days, establish a new Collateral Account meeting the conditions specified in the definition of Eligible Deposit Account, and shall transfer any cash or any investments in the Collateral Account to such new Collateral Account. (c) The Indenture Trustee shall have exclusive dominion and control of the Collateral Account and all funds therein, and shall make withdrawals from the Collateral Account only in accordance with this Indenture. (d) The Collateral Agreement shall require State Street Bank and Trust Company to send confirmation to the Indenture Trustee, the Owner Trustee and the Lessee that it has credited the Specified Investments to the Collateral Account and to make appropriate entries on its books identifying the Specified Investments as pledged to the Indenture Trustee. Section 2.14. Investment of Funds on Deposit in the Collateral Account. (a) Funds deposited in the Collateral Account shall be invested and reinvested by the Indenture Trustee, subject to Section 17.02 of the Participation Agreement, at the risk of the Owner Trustee, in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee in accordance with Section 2.14(b) below; provided, however, that if Specified Investments meeting the requirements of Section 2.14(b) are not available on any day on which funds are to be invested as contemplated by the preceding provisions of this Section 2.14(a), the Indenture Trustee may leave such funds in the Collateral Account uninvested until the earlier of (i) the date on which an appropriate Specified Investment becomes available and (ii) the date on which the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall be terminated. The Indenture Trustee shall maintain possession of the negotiable instruments or securities, if any, evidencing such Specified Investments and, in the case of any Specified Investments in book-entry form, such Specified Investments shall be credited to an account of the Indenture Trustee or a financial intermediary with the applicable Federal Reserve Bank; provided, however, if the account is credited to the financial intermediary, the financial intermediary shall make written confirmation thereof to the Indenture Trustee and make an appropriate entry on its books identifying the Specified Investments as pledged to the Indenture Trustee. All proceeds of and any income, interest and other payments and distributions on or with respect to any Specified Investments shall be deposited in or credited to the Collateral Account and thereafter shall be held, invested and applied by the Indenture Trustee in accordance with this Indenture. The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of any Losses. (b) On the Certificate Closing Date, the Indenture Trustee shall invest the amount deposited in the Collateral Account pursuant to Section 2.01(c) of the Participation Agreement in Specified Investments selected by the Lessee and approved by the Indenture Trustee for the account of the Owner Trustee which mature on or prior to June 1, 1999. If the Delivery Date is postponed pursuant to Section 3.02(b) or Section 3.03 of the Participation Agreement, the proceeds of the Specified Investments referred to in the preceding sentence may be invested in Specified Investments which mature within 14 days after the rescheduled Delivery Date. After the Delivery Date, if there are Series C Certificates outstanding that are required to be prepaid on the Series C Prepayment Date, the amount then remaining in the Collateral Account shall be invested in Specified Investments which mature on or prior to the Series C Prepayment Date. If no Delivery Date occurs, then any Specified Investment shall mature no later than the 15th day after the Cut-Off Date. Notwithstanding anything to the contrary in this subsection (b), the Indenture Trustee shall invest the amounts deposited in the Collateral Account in a manner which shall result in cash being available in the Collateral Account which shall be used by the Indenture Trustee to pay a portion of interest payable on each Certificate secured by the Collateral Account on each Payment Date during the period in which funds are on deposit in the Collateral Account. (c) If for any reason the Indenture Trustee shall be required to make any distributions of the Liquid Collateral prior to the maturity date of any Specified Investment, the Indenture Trustee shall cause the same to be sold in accordance with standard commercial practices, and the Lessee, for the account of the Owner Trustee, shall forthwith pay to the Subordination Agent an amount equal to any Losses as provided in Section 17.02(a) of the Participation Agreement. (d) Pursuant to Section 17.02(b) of the Participation Agreement, interest payable on the Certificates during the period in which funds are on deposit in the Collateral Account shall be paid by the Lessee to the extent such interest payable is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. Section 2.15. Release of Debt Portion and other Amounts in the Collateral Account on Delivery Date. Subject to the satisfaction or waiver of the conditions precedent to the Indenture Trustee's obligations set forth in Section 4.02 of the Participation Agreement, on the Delivery Date subject to the proviso to Section 3.02(a) of the Participation Agreement, the Indenture Trustee shall release from the Collateral Account an amount of Liquid Collateral equal to the lesser of (A) the Debt Portion and (B) the amount actually in the Collateral Account on the Delivery Date. Subject to the proviso to Section 3.02(a) of the Participation Agreement, such amount so released, together with the amount of any Losses received from the Lessee pursuant to Section 17.02(a) of the Participation Agreement, shall be used to finance a portion of the Purchase Price as contemplated by Section 3.02(a) of the Participation Agreement. Concurrently with such release, the Lessee may instruct the Indenture Trustee to, and if so instructed by the Lessee, the Indenture Trustee, on behalf of the Owner Trustee, shall, deposit the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion, into one or more Outstanding C Accounts as contemplated by Section 3.02(a) of the Participation Agreement. If the Indenture Trustee is not so instructed by the Lessee, any amounts remaining in the Collateral Account after such release shall be retained in the Collateral Account until the Series C Prepayment Date to secure the Secured Obligations relating to any Series C Certificates subject to prepayment pursuant to Section 6.02(a)(viii) hereof; provided, that, any portion of such amounts so retained may be released from the Collateral Account by the Indenture Trustee prior to the Series C Prepayment Date pursuant to Section 2.19(b) hereof. The aggregate principal amount of the Series C Certificates outstanding after the Delivery Date which are subject to prepayment pursuant to Section 6.02(a)(viii) hereof shall be set forth in a written notice by the Lessee to the Indenture Trustee in accordance with Section 2.03(b) of the Participation Agreement. Any such amount retained in the Collateral Account shall be invested in Specified Investments pursuant to Section 2.14(b) hereof. Section 2.16. Cut-Off Date; Series C Prepayment Date. (a) In the case of a prepayment under Section 6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amount so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement, shall be applied to pay amounts due under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. (b) On the Series C Prepayment Date, in the case of a prepayment under Section 6.02(a)(viii) hereof, the Indenture Trustee shall release from the Collateral Account all amounts held in the Collateral Account on such date. Such amounts so released, together with the amount of any Losses paid by the Lessee to the Subordination Agent pursuant to Sections 17.02(a) and 17.02(d) of the Participation Agreement, shall be applied to pay all amounts due under Section 6.02(b)(1) hereof on the Series C Prepayment Date, whereupon the Lien of this Indenture on the Collateral Account and the Liquid Collateral shall terminate and any amount (net of any unpaid Losses) remaining after such release and application shall be remitted by the Indenture Trustee, on behalf of the Owner Trustee, to the Lessee. Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance of its Certificates of any Series, each Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Certificate Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01 hereof, except as expressly provided in Article V hereof. (b) By the acceptance of its Certificates of any Series (other than Series A), each Holder of such Series agrees that in the event that such Holder, in its capacity as a Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to received under this Section 2.17 or Article V hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.17(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Article V hereof. (c) As used in this Section 2.17, the term "Senior Holder" shall mean, (i) the Holders of Series A Certificates until the Secured Obligations in respect of Series A Certificates have been paid in full, (ii) after the Secured Obligations in respect of Series A Certificates have been paid in full, the Holders of Series B Certificates until the Secured Obligations in respect of Series B Certificates have been paid in full and (iii) after the Secured Obligations in respect of Series B Certificates have been paid in full, the Holders of Series C Certificates until the Secured Obligations in respect of Series C Certificates have been paid in full. Section 2.18. Reoptimization. The Owner Trustee shall have the right, on the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of Series C Certificates pursuant to Section 6.02(a)(viii) hereof, to modify the schedule of principal payments of the Certificates subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. Section 2.19. Increase or Decrease in Principal Amount of Series C Certificates. (a) On or prior to the Delivery Date of the Aircraft, upon written notice from the Lessee on behalf of the Owner Trustee to the Indenture Trustee, the outstanding principal amount of the Series C Certificates issued hereunder may be increased, provided, that the aggregate principal amount of Series C Certificates issued hereunder, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of the Series C Certificates shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. (b) (i) Prior to the Delivery Date, the principal amount of the Series C Certificates may be decreased, and (ii) on or after the Delivery Date, the principal amount of the Series C Certificates, if any, outstanding after the Delivery Date which would otherwise be required to be prepaid pursuant to Section 6.02(c)(viii) hereof, may be decreased, in each case upon written notice by the Lessee, on behalf of the Owner Trustee, to the Indenture Trustee. In such event the Indenture Trustee shall, if so instructed by the Lessee on behalf of the Owner Trustee, release a corresponding amount from the Collateral Account and transfer such amount to one or more Outstanding C Accounts. To give effect to the foregoing, Schedule I to the Indenture and each Certificate shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. ARTICLE III COVENANTS Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof, duly and punctually pay or cause to be paid the principal of, and interest and Make-Whole Premium, if any, and all other amounts due on, each of the Certificates and under this Indenture at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. Principal and interest and other amounts due hereunder or under the Certificates shall be payable in dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Department (or such other account at such other financial institution as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. Section 3.02. Offices for Payments, etc. So long as any of the Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for prepayment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and Make-Whole Premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or Make-Whole Premium, if any, on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. Section 3.05. Covenants of SSB and the Owner Trustee. (a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and 7.04(c) of the Participation Agreement. (b) The Owner Trustee hereby covenants and agrees as follows: (i) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Event of Default, an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Event of Default, Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (ii) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Article 13 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; (iii) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (iv) except as contemplated by the Operative Agreements, the Owner Trustee will not contract for, create, incur or assume any debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing, or otherwise), endorse or otherwise take action to become contingently liable, directly or indirectly, in connection with the debt of any other Person. Section 3.06. [Reserved]. Section 3.07. Disposal of Trust Indenture Estate. At any time and from time to time any part of the Trust Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release any part of the Trust Indenture Estate so sold or disposed of or as to which an Event of Loss has occurred or as to which the Lease has been terminated from the Lien of this Indenture. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 hereof shall be complied with. Section 3.08. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner Trustee shall have received whatever title was conveyed to it by the Lessee, and (b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB. Neither SSB, the Indenture Trustee nor the Owner Participant makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of SSB, the Indenture Trustee and the Owner Participant made under this Indenture or in the Participation Agreement. Section 3.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of UCC financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS Section 4.01. Holder Lists; Ownership of Certificates. (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall furnish to the Indenture Trustee semi-annually not more than fifteen (15) days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE Section 5.01. Basic Rent Distribution. Except as otherwise provided in Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent, any payment received by the Indenture Trustee pursuant to Section 8.03(a) hereof and any payment received by the Indenture Trustee pursuant to Section 17.02(b) or 17.02(c) of the Participation Agreement shall be promptly distributed in the following order of priority: first, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Certificates shall be distributed to the Holders of Series A Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Certificate bears to the aggregate amount of the payments then due under all Series A Certificates; (ii) after giving effect to paragraph (i) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Certificates shall be distributed to the Holders of Series B Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Certificate bears to the aggregate amount of the payments then due under all Series B Certificates; and (iii) after giving effect to paragraph (ii) above, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series C Certificates shall be distributed to the Holders of Series C Certificates ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Certificate bears to the aggregate amount of the payments then due under all Series C Certificates; and second, the balance if any of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement. Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft (including pursuant to Section 11.03(e) of the Lease, but, in the case of said Section 11.03(e), subject to the time limits specified therein) or as the result of, or in connection with any event under the Lease giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection with such prepayment, second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series A Certificates; (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series B Certificates; and (iii) after giving effect to paragraph (ii) above, to pay the amounts specified in paragraph (iii) of clause "second" of Section 5.03 hereof then due and payable in respect of the Series C Certificates; provided that payments pursuant to this clause "second" shall be made without the payment of Make-Whole Premium except in the particular circumstances provided in Section 6.02(b) hereof; and third, as provided in clause "third" of Section 5.03 hereof; provided that if a Replacement Airframe shall be substituted for an Airframe subject to an Event of Loss as provided in Section 11.03 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Trust Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the release of such damaged Airframe and the replacement thereof as herein provided. (b) Any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Article 11 or 13 of the Lease as the result of loss or damage not constituting an Event of Loss with respect to the Aircraft, or as a result of such loss or damage constituting an Event of Loss (x) if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Article 11 or 13 but for the fact that an Event of Default shall have occurred and be continuing or (y) are pledged to the Lessor as security in connection with an Event of Loss in accordance with Section 11.03(e) of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the conditions for payment to the Lessee specified in said Article 11 or 13, as the case may be, shall be fulfilled and there shall not be continuing any Event of Default, such amount, and the proceeds of any investment thereof, shall, to the extent not theretofore applied, be paid to the Lessee to the extent provided in the Lease. Section 5.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all payments (other than Excepted Payments) received and all amounts held or realized by the Indenture Trustee (a) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and the Indenture Trustee has commenced the exercise of remedies pursuant to Article VIII hereof, or (b) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as between itself and the Holders in reimbursement of such expenses; second, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series A Certificates to the date of distribution, shall be distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series B Certificates to the date of distribution, shall be distributed to the Holders of Series B Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; and (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Certificates, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole Premium) in respect of the Series C Certificates to the date of distribution, shall be distributed to the Holders of Series C Certificates, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Certificates held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Certificates held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Premium) to the date of distribution; (it being understood that amounts payable under this clause "second" shall not include Make-Whole Premium); and third, the balance, if any of such payments or amounts remaining thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt, any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass Through Trustee, in each case whether pursuant to Article 8 or 9 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee) entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Section 5.05. Other Payments. Any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Article 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof and second, in the manner provided in clause "third" of Section 5.03 hereof. Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 2.06 of the Trust Agreement. Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and Make-Whole Premium, if any, and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such Certificate) due hereunder to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such Certificate if then due hereunder or under such Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof); provided that, solely for the purpose of determining whether an Indenture Event of Default shall have occurred and be continuing, each such payment shall be deemed applied in the following order of priority: first, in the manner provided in clause "first" above, second, in the manner provided in clause "third" above, third, in the manner provided in clause "second" above and fourth, in the manner provided in clause "fourth" above. Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any provision of any Indenture Document providing for investment by the Indenture Trustee of sums pursuant to Section 23.01 of the Lease or this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities selected by (i) so long as no Event of Default shall have occurred and be continuing, the Lessee (and in the absence of written direction by the Lessee, the Indenture Trustee shall invest such monies in direct obligations of the United States of America) or (ii) so long as an Event of Default shall have occurred and be continuing, the Indenture Trustee and in each case shall be of the type listed in clauses (i) through (iv) of Section 23.01 of the Lease. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms hereof or the Lease, as the case may be. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee other than by reason of its willful misconduct or gross negligence, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise confirmed in writing, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold any Taxes required to be withheld, except to the extent that the Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder and under no circumstances shall the failure of any such Holder to receive any amounts so withheld constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Article 8 of the Participation Agreement, if the Lessee is required to pay any such Tax, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be entitled to receive any payments otherwise distributable to the Holder of any Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof until the foregoing amounts shall have been recovered in full by the Lessee. ARTICLE VI PREPAYMENT OF CERTIFICATES Section 6.01. No Prepayment Prior to Maturity. Except as provided in Sections 6.02, 6.06 and 8.02 hereof, the Certificates may not be prepaid prior to their respective Maturities. Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full (and not in part except under clause (viii) below): (i) If an Event of Loss occurs with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe (unless pursuant to Section 11.03 of the Lease and Section 9.08 hereof replacement equipment is substituted therefor). (ii) If the Lessee, pursuant to Section 4.02(a) of the Lease, gives notice of purchase of the Aircraft (and Section 2.12 hereof shall not be applicable in connection with such purchase), but subject to Section 6.02(c) below. (iii) If the Owner Participant or the Owner Trustee on behalf of the Owner Participant gives notice of prepayment to the Indenture Trustee pursuant to Section 8.02 hereof (unless such notice is revoked in accordance with such Section). (iv) If the Lessee, pursuant to Section 10.01 of the Lease, gives notice of a voluntary termination for obsolescence or surplus, but subject to Section 6.02(c) below. (v) Pursuant to Section 15.01 of the Participation Agreement in connection with a refinancing of the Certificates, but subject to Section 6.02(c) below. (vi) Unless the last sentence of Section 3.03(b) of the Participation Agreement is applicable, as contemplated by Section 2.16 hereof and Section 3.03(b) of the Participation Agreement if the Delivery Date has not occurred on or prior to the Cut-Off Date. (vii) At the option of the Owner Trustee with the prior written consent of the Lessee upon not less than 25 days' prior written notice. (viii) With respect to the Series C Certificates only, as provided in Section 2.03(b) of the Participation Agreement. (b) In the event of a prepayment of the Certificates pursuant to Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received notice from the Lessee in accordance with and subject to the terms of Section 4.02(a) or 10.01 of the Lease or Article 15 of the Participation Agreement, as the case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written notice to the Indenture Trustee and to the Holders of all of the Certificates specifying the Business Day on which the Certificates shall be prepaid. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above, the Certificates shall be prepaid in full on the Loss Payment Date as defined in Section 11.02 of the Lease. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in full on the date so designated in the notice referred to in Section 8.02 hereof. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii) or (iv) above, the Certificates shall be prepaid in full on the Termination Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the Refinancing. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date designated in the notice referred to therein. In the case of a prepayment of the Series C Certificates pursuant to Section 6.02(a)(viii) above, the amount of such Series C Certificates to be prepaid shall be prepaid on the Series C Prepayment Date. The day on which the Certificates are to be prepaid pursuant to this Section 6.01(b) is herein referred to as the "Prepayment Date". On or prior to the Prepayment Date, immediately available funds shall be deposited with the Indenture Trustee in an amount in respect of the Certificates equal to: (1) in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(i), 6.02(a)(iii) (if clause (i) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(vi) or 6.02(a)(viii) or, if such prepayment is made on or after the applicable Premium Termination Date, 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of (A) the aggregate principal amount of such Certificates then Outstanding, (B) accrued interest on the Certificates to the Prepayment Date and (C) all other aggregate sums due the Indenture Trustee hereunder or under the Participation Agreement or the Lease, but excluding any Make-Whole Premium or other premium or penalty, or (2) if such prepayment is made prior to the applicable Premium Termination Date, in the event of a prepayment of the Certificates pursuant to Section 6.02(a)(ii), 6.02(a)(iii) (if clause (ii) of the first sentence of Section 8.02(a) hereof is applicable), 6.02(a)(iv), 6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in clauses (A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable in respect of all Certificates with respect to which the Premium Termination Date therefor has not occurred (the aggregate amount required to be paid pursuant to this sentence being herein referred to as the "Prepayment Price"). (c) If, pursuant to the last paragraph of Section 10.01(f) of the Lease, no Termination Date shall occur, or if no refinancing shall occur pursuant to Section 15.01 of the Participation Agreement, the Lessee shall give notice thereof to the Indenture Trustee, and the prepayment proposed to be effected in respect thereof shall not occur. Section 6.03. Notice of Prepayment to Holders. In order to effect any prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give prompt notice by first class mail of prepayment to each Holder of an Outstanding Certificate. Such notice may be revoked by the Owner Trustee at any time on or before the Prepayment Date by prompt notice to the Holders except as otherwise provided in the Lease or the Participation Agreement. All notices of prepayment shall state: (1) the Prepayment Date, (2) the applicable basis for determining the Prepayment Price, (3) that on the Prepayment Date, subject to the provisions hereof, the Prepayment Price will become due and payable, and that interest on the Certificates shall cease to accrue on and after such Prepayment Date, and (4) the place or places where such Certificates are to be surrendered for payment. Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section 6.06 hereof), as the case may be, shall not then be held in cash or Permitted Investments (marked-to-market net of all costs and expenses of liquidation thereof) by the Indenture Trustee in immediately available funds and deposited for the purpose, pay to the Indenture Trustee an amount equal to the difference between (a) the amount then so held and (b) the Prepayment Price or the Sinking Fund Redemption Price, as the case may be. If there shall so be on deposit and/or deposited the applicable Prepayment Price or Sinking Fund Redemption Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion being prepaid of, the Outstanding Certificates on and after such Prepayment Date or such Sinking Fund Redemption Date. Section 6.05. Certificates Payable on Prepayment Date. On the Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner Trustee has requested the Indenture Trustee to revoke such notice of prepayment in accordance with Section 6.03 hereof or (B) as otherwise provided in the Lease) become due and payable and from and after such Prepayment Date (unless there shall be a default in the payment of the Prepayment Price) such Certificates shall cease to bear interest. Upon surrender by any Holder of its Certificate for prepayment in accordance with said notice, such Holder shall be paid the principal amount of its Certificate then outstanding, accrued interest thereon to the Prepayment Date, all other sums due to such Holder hereunder, under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of such Certificate. If any Certificate called for prepayment shall not be so paid upon surrender thereof for prepayment, the principal shall, until paid, continue to bear interest from the Prepayment Date at the interest rate applicable to such Certificate. Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall be subject to partial redemption, at the aggregate principal amount set forth for the Certificates of the respective Series and Maturity, on a pro rata basis, on each date specified on Schedule I attached hereto (a "Sinking Fund Redemption Date") for such payment on the Certificates of such Series and Maturity. The Owner Trustee shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Certificates of each Series in the order of priority set forth in clause "first" of Section 5.01 hereof and among the Holders of the Certificates of each Series then Outstanding on a pro rata basis the aggregate principal amount set forth on Schedule I attached hereto, together with accrued interest to such Sinking Fund Redemption Date, but without Make-Whole Premium (the "Sinking Fund Redemption Price"). ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS Section 7.01. Indenture Event of Default. "Indenture Event of Default" means any of the following events (whatever the reason for such Indenture Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) any Event of Default specified in Article 16 of the Lease (other than an Event of Default arising solely as the result of the failure to make an Excepted Payment unless the Owner Participant shall notify the Indenture Trustee in writing that such failure shall constitute an Indenture Event of Default); or (ii) any failure of the Owner Trustee to (A) observe any of its covenants in the fifth paragraph following the Habendum Clause hereof or Section 3.05(b)(iii) hereof or Section 7.02(b) of the Participation Agreement (unless otherwise removed as Owner Trustee within 10 days after notice thereof to the Owner Participant or (B) observe or perform any other covenant or obligation of the Owner Trustee in this Indenture (other than any such failure arising by reason of an Event of Default or specified in clause (iii) below) and the continuance of such failure for a period of thirty (30) days or, if such covenant is capable of cure and the Owner Trustee is diligently proceeding to effect such cure, 120 days, after written notice thereof identified as a "Notice of Indenture Event of Default" to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates specifying such failure to so observe or perform and requiring it to be remedied; or (iii) the failure of the Owner Trustee other than by reason of a Default or an Event of Default (i) to pay principal, interest or Make-Whole Premium, if any, on any Certificate when due, and such failure shall have continued unremedied for ten (10) Business Days after the date when due or (ii) any failure of the LC Bank to make any payment under the Letter of Credit when such payment is due or (iii) to pay any other amounts hereunder or under the Certificates when due and such failure shall have continued unremedied for a period of thirty (30) days after the Owner Trustee and the Owner Participant shall receive written demand therefor from the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (iv) (A) any representation or warranty made by SSB, the Owner Trustee, the Owner Participant or any Owner Participant Guarantor or any Owner Trustee Guarantor, in Article 7 of the Participation Agreement, in Section 5.01 of the Lease, in the Owner Participant Guaranty or in any certificate of SSB, the Owner Trustee, the Owner Participant, or any Owner Participant Guarantor furnished to the Indenture Trustee or any Holder in connection herewith or therewith or pursuant hereto or thereto shall prove to have been incorrect when made and was and remains in any respect material to the Holders, and such misrepresentation shall not have been corrected within 30 days following notice thereof identified as a "Notice of Indenture Event of Default" being given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (B) any covenant made by SSB or the Owner Trustee in the Participation Agreement, or by the Owner Participant or any Owner Participant Guarantor in Article 7 of the Participation Agreement or in the Owner Participant Guaranty shall be breached in any respect and such breach shall remain unremedied for a period of thirty (30) days after there has been given to the Owner Trustee and the Owner Participant by the Indenture Trustee or by Certificate Holders of not less than 25% in aggregate principal amount of Outstanding Certificates a written notice identified as a "Notice of Indenture Event of Default" specifying such breach and requiring it to be remedied; or (v) the Owner Trustee, the Lessor's Estate, any Owner Trustee Guarantor, the Owner Participant or any Owner Participant Guarantor shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation; (vi) an order for relief shall be entered in respect of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor shall file any answer admitting or not contesting the material allegations of a petition filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor in any proceeding referred to in clause (vi) below or seek or consent or acquiesce in the appointment of any trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of its properties; or (vi) without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered constituting an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or if any such petition shall be filed against the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such petition shall not be dismissed within 90 days, or if, without the consent or acquiescence of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, an order shall be entered appointing a trustee, custodian, receiver or liquidator of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, or of all or any substantial part of the properties of the Owner Trustee or the Lessor's Estate or any Owner Trustee Guarantor or the Owner Participant or any Owner Participant Guarantor, as the case may be, and such order shall not be dismissed within 90 days; or (viii) any Owner Trustee Guaranty or any Owner Participant Guaranty shall cease to be a valid and enforceable obligation of any Owner Trustee Guarantor or any Owner Participant Guarantor, as the case may be, or otherwise shall not be in full force and effect. Section 7.02. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall (i) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in clause (i) of Section 7.01 hereof, exercise any and all of the remedies pursuant to Article 17 of the Lease; provided that without the consent of the Owner Trustee such exercise of remedies shall not occur until after the latest date on which the Owner Trustee may cure the related Event of Default pursuant to Section 8.03 hereof. The Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee, the Lessee and any transferee of the Lessee and all Persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting any of the foregoing, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, it is understood and agreed that if the Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it shall substantially simultaneously therewith, to the extent the Indenture Trustee is then entitled to do so hereunder and under the Lease, and is not then stayed or otherwise prevented from doing so, proceed (to the extent it has not already done so) to declare the Lease in default and commence the exercise in good faith of one or more of the remedies under Section 17.01(a)(i), (ii), or (vi) of the Lease (as it shall determine in its sole discretion). It is further understood and agreed that if the Indenture Trustee is unable to exercise one or more remedies under Article 17 of the Lease because of any stay or operation or law or otherwise, the Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture (A) until the earlier of (i) 60 days from the date of any such stay or applicable order under Section 1110 of the Bankruptcy Code including any extension consented to by the Indenture Trustee or the Holders of Certificates of such period permitted under Section 1110(b) of the Bankruptcy Code and (ii) the date of actual repossession of the Aircraft by the Indenture Trustee or (B) if the Lessee has agreed to perform or assume the Lease and no Event of Default other than as specified in Section 16.01(e), (f) or (g) of the Lease shall be continuing. For the avoidance of doubt, it is expressly understood and agreed that except as aforesaid the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent the Indenture Trustee from exercising all of its rights, powers and remedies under this Indenture, including, without limitation, this Article VII. The Indenture Trustee further agrees that notice of intent to foreclose shall be given to the Owner Trustee at the earlier of the commencement of any proceeding or at least 30 days prior to the consummation of foreclosure of the Lien of this Indenture. (b) If an Indenture Event of Default under clause (v), (vi) or (vii) of Section 7.01 hereof shall occur and be continuing, the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal amount of all Outstanding Certificates, together with accrued interest thereon and all other amounts due thereunder, but without Make-Whole Premium, shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Trust Indenture Estate, however, the Holders of not less than 50% in aggregate principal amount of Outstanding Certificates, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11 hereof. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) Each Holder shall be entitled at any sale to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder secured by the Lien of this Indenture (but only to the extent that an amount equal to such purchase price would have been paid to such Holder pursuant to Article V hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect). Section 7.03. Return of Aircraft, etc. Subject to Section 7.02 hereof: (a) If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Trust Indenture Estate to which the Indenture Trustee shall at the time be entitled under this Indenture. Subject to the foregoing, if the Owner Trustee shall for any reason fail to execute and deliver such documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee or an agent or representative designated by the Indenture Trustee, the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee or an agent or representative designated by the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of such Trust Indenture Estate wherever it may be found and enter any of the premises of the Lessee or the Owner Trustee wherever such Trust Indenture Estate may be or be supposed to be and search for such Trust Indenture Estate and take possession of and remove such Trust Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such Trust Indenture Estate shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance and repairs to and of such Trust Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each case subject to Section 7.02 hereof, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee may reasonably deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of all or any part of the Trust Indenture Estate as the Indenture Trustee may determine. Further, the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate other than Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee under this Indenture. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management, or disposition of the Trust Indenture Estate, and of all maintenance and repairs, and to make all payments which the Indenture Trustee may be required or may reasonably elect to make for any taxes, assessments, insurance or other proper charges upon the Trust Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee and the Lessee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee and of all persons properly engaged and employed for such purposes by the Indenture Trustee; provided, that any excess amounts shall be promptly distributed in accordance with Section 5.03 hereof. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Trust Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time lawful and that all mandatory legal requirements shall be complied with. Any notice required pursuant to the terms hereof in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Trust Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. The Indenture Trustee may exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Trust Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Trust Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Trust Indenture Estate or any part thereof unless the Certificates shall have been accelerated. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Trust Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent of such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof, and effective upon the occurrence and continuance of an Indenture Event of Default, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and the Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Trust Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Trust Indenture Estate. (g) Any sale of the Trust Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of prepayment laws which may not be waived pursuant to Section 7.13 hereof. Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. In case there shall be pending proceedings relative to the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Owner Trustee, or to the creditors or property of the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein or herein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, interest and other amounts owing and unpaid in respect of the Certificates or hereunder, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or willful misconduct. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and rights to assert claims under this Indenture, or under any of the Certificates, may be enforced by the Indenture Trustee without the possession of such Certificates on any trial or other proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders, as provided herein. In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to such proceedings. Section 7.05. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or later any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee or the Lessee or to be an acquiescence in any such default. Section 7.06. Suits for Enforcement. If an Indenture Event of Default has occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion of the Trust Indenture Estate shall be done in accordance with Section 7.03(c) hereof. Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Holder, then the Owner Trustee, the Indenture Trustee, the Owner Participant, the Holders and the Lessee shall, subject to any binding determination in such proceeding, be restored to their former positions and rights under this Indenture with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. Section 7.08. Limitations on Suits by Holders. No Holder of any Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Event of Default shall then have occurred and be continuing, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10 hereof; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Trust Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. Section 7.09. Unconditional Right of Holders to Receive Principal, Interest and Make-Whole Premium, and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and Make-Whole Premium, if any, on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08 hereof, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. Section 7.10. Control by Holders. The Majority in Interest of Certificate Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee; and provided further that (subject to the provisions of Section 9.02 hereof) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would involve the Indenture Trustee in personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02 hereof) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with the direction by the Majority in Interest of Certificate Holders. Section 7.11. Waiver of Past Indenture Default. Upon written instructions from the Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, that in the absence of written instructions from all Holders and each Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default (a) in the payment of the principal of or Make-Whole Premium, if any, or interest on, or other amounts due under, any Certificate then Outstanding, or (b) in respect of a covenant or provision of this Indenture which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder. Section 7.12. Notice of Indenture Default. The Indenture Trustee shall transmit to the Owner Trustee, the Holders and to the Owner Participant notice of any Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give such notice to the Holders until the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. Section 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or prepayment law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Trust Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Trust Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a) Subject to Section 13.01 hereof, without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Indenture Documents may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection (b) of this Section 8.01 may be taken without the consent of the Indenture Trustee or any Holder. (b) Subject to the provisions of subsection (c) of this Section 8.01, the respective parties to the Indenture Documents, at any time and from time to time, without the consent of the Indenture Trustee or of any Holder, may: (1) so long as no Indenture Event of Default shall have occurred and be continuing, modify, amend or supplement the Lease, or give any waiver with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Lease shall not modify, amend or supplement, or give any waiver for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease as in effect on the effective date hereof: Article 2 (provided that, if in respect of the Term, the result thereof would not be to shorten the Term of the Lease to a period shorter than the period ending with the Maturity of any Certificate), Section 3.03 (except to the extent such Section relates to amounts payable (whether directly or pursuant to this Indenture) to Persons other than Holders, each Liquidity Provider, the Subordination Agent and the Indenture Trustee in its individual capacity), Section 3.05, Section 3.06 (except insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (other than as such Sections 3.03, 3.05 and 3.06 may be amended pursuant to Section 3.04 of the Lease as in effect on the effective date hereof), Section 5.01, Article 6, Article 10 (except that further restrictions may be imposed on the Lessee), Article 11 (except that additional requirements may be imposed on the Lessee), Article 13 (except for Section 13.05 and except that additional insurance requirements may be imposed on the Lessee), Article 14 (except in order to increase the Lessee's liabilities or enhance the Lessor's rights thereunder), Article 15 (except in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Transportation Code), Section 16.01 (except to impose additional or more stringent Events of Default), Article 17 (except to impose additional remedies), Section 19.01 (except to impose additional requirements on the Lessee), Section 20.01, Article 22, Section 23.01, Section 26.03 and any definition of terms used in the Lease, to the extent that any modification of such definition would result in a modification of the Lease not permitted pursuant to this subsection (b); provided that the parties to the Lease may take any such action without the consent of the Indenture Trustee or any Holder to the extent such action relates to the payment of amounts constituting, or the Owner Trustee's, the Owner Participant's or the Lessee's rights or obligations with respect to, Excepted Payments (other than the place, time and manner of payment of Basic Rent constituting an Excepted Payment); (2) modify, amend or supplement the Trust Agreement and any other Indenture Document (other than the Lease and the Participation Agreement), or give any consent, waiver, authorization or approval with respect thereto, in each case only to the extent any such action shall not adversely impact the interests of the Holders; (3) modify, amend or supplement the Participation Agreement, or give any consent, waiver, authorization or approval with respect thereto, except that without compliance with subsection (a) of this Section 8.01 the parties to the Participation Agreement shall not modify, amend or supplement, or give any consent, waiver, authorization or approval for the purpose of adding provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Participation Agreement as in effect on the effective date hereof: Articles 6, 8 and 9 and Section 10.01(b) (insofar as such Articles 6, 8 and 9 and Section 10.01(b) relate to the Indenture Trustee, the Pass Through Trustee and the Holders), Article 7 and Sections 3.05, 15.01, 17.02 and 17.11 and any definition of terms used in the Participation Agreement, to the extent that any modification of such definition would result in a modification of the Participation Agreement not permitted pursuant to this subsection (b); and (4) modify, amend or supplement any of said agreements in order to cure any ambiguity, to correct or supplement any provisions thereof which may be defective or inconsistent with any other provision thereof or of any provision of this Indenture, or to make any other provision with respect to matters or questions arising thereunder or under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided the making of any such other provision shall not adversely affect the interests of the Holders. (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease or the Participation Agreement, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 8.01 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate affected thereby, and each Liquidity Provider, (1) modify, amend or supplement the Lease in such a way as to extend the time of payment of Basic Rent or Stipulated Loss Value or Supplemental Rent payable to the Holders or any Liquidity Provider or any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders or any Liquidity Provider (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss or Termination Value and any other amounts payable to the Indenture Trustee for its own account or for the account of the Holders (subject in any event to Section 3.05 of the Lease) upon termination of the Lease with respect to the Aircraft payable under, or as provided in, the Lease as in effect on the effective date hereof, or reduce the amount of any installment of Basic Rent or Supplemental Rent so that the same is less than the payment of principal of, and interest on the Certificates and Make-Whole Premium, if any, and amounts due to each Liquidity Provider, as the case may be, to be made from such installment of Basic Rent or Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value, or any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon the occurrence of an Event of Loss so that the same is less than the accrued interest on and the principal as of the Loss Payment Date, of the Certificates at the time Outstanding or reduce the amount of Termination Value and any other amounts payable under, or as provided in, the Lease as in effect on the effective date hereof upon termination of the Lease with respect to the Aircraft so that the same is less than the accrued interest on and principal as of the Lease Termination Date and Make-Whole Premium, if any, of Certificates at the time Outstanding, or (2) modify, amend or supplement the Lease in such a way as to, or consent to any assignment of the Lease or give any consent, waiver, authorization or approval which would, release the Lessee from its absolute and unconditional obligations in respect of payment of Basic Rent or Supplemental Rent, or Stipulated Loss Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) upon the occurrence of an Event of Loss, or Termination Value and any other amounts payable to the Indenture Trustee for its own account or the account of the Holders (subject in any event to Section 3.05 of the Lease) of the Lease with respect to the Aircraft, payable under, or as provided in, the Lease as in effect on the effective date hereof, except for any such assignment pursuant to Section 2.12 hereof, and except as provided in the Lease as in effect on the effective date hereof. (d) At all times so long as this Indenture is in effect, the consent of the Owner Trustee (at the direction of the Owner Participant) shall be required in order (i) to amend, modify or supplement the Lease or any other Operative Document to which the Owner Trustee is a party or to waive compliance by the Lessee with any of its obligations thereunder, (ii) to grant any consent requested under the Lease and (iii) to exercise discretion on the Lessee's option to substitute a Replacement Airframe or Replacement Engines after an Event of Loss pursuant to the Lease. Notwithstanding the foregoing, but subject always to the provision of Section 15.05 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) declare the Lease to be in default under Article 17 (other than with respect to Excepted Payments) thereof and (B) subject only to the provisions of this Indenture, exercise the remedies set forth in such Article 17 of the Lease (other than in connection with Excepted Payments) and in Article 7 hereof. Nothing in this Indenture shall be deemed to prohibit the Owner Participant or the Owner Trustee from making demand on the Lessee for, or from commencing an action at law to obtain the payment of, or from receiving payment of, any Excepted Payment; provided, however, that if the Owner Trustee is proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section 17.01(a)(v), and only Section 17.01(a)(v), of the Lease. Section 8.02. Owner Participant's Right to Elect to Prepay or Purchase the Certificates. (a) If (i) an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have become due and payable pursuant to Section 7.02(b) or (c) hereof or (ii) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have become due and payable pursuant to Section 7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may, but shall be under no obligation to, do either of the following: (1) direct the Owner Trustee to cause the prepayment of all, but not less than all, of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a Prepayment Date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph "first" under Section 5.03 and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee is made, the Certificates shall cease to accrue interest from and after the Prepayment Date, and after distribution of such payment to the Holders, the Indenture Trustee shall release the Trust Indenture Estate from the Lien of this Indenture; or (2) purchase all, but not less than all, of the Outstanding Certificates by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate a date which shall be a Business Day and which shall be not less than 30 days after the date of such notice on which the Owner Trustee shall pay to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, together with accrued interest on such amount to the date of purchase, the aggregate amount of any Make-Whole Premium applicable to each Outstanding Certificate (if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate) in the case of a purchase pursuant to clause (a)(ii) above, plus all other sums due any Holder or the Indenture Trustee hereunder or under the Participation Agreement or the Lease. Upon receipt of the Indenture Trustee of such amount, each Holder will be deemed, whether or not Certificates shall have been delivered to the Indenture Trustee on such date, to have thereupon sold, assigned, transferred and conveyed (and shall promptly take such actions as the Owner Participant shall reasonably request to evidence such sale, assignment, transfer and conveyance) to the Owner Participant (without recourse or warranty of any kind except for its own acts), all of the right, title and interest of such Holder in and to the Trust Indenture Estate and this Indenture and all Certificates held by such Holder and the former Holders shall not be entitled to receive any interest on the principal amount of such Certificates after the purchase date, and the Owner Participant shall be deemed to have assumed (and shall promptly take such actions as any Holder shall reasonably request to evidence such assumption) all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale. If the Owner Trustee shall so request, such Holder will comply with all the provisions of Section 2.06 of this Indenture to enable new Certificates to be issued to the Owner Participant in such authorized denominations as the Owner Participant shall request. All charges and expenses required pursuant to Section 2.06 hereof in connection with the issuance of any such new Certificates shall be borne by the Owner Participant. (b) From and after the deposit by the Owner Trustee of the applicable Prepayment Price or purchase price with the Indenture Trustee pursuant to Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall occur an Event of Default under the Lease as a result of the Lessee's failure to make any payment of an installment of Basic Rent, and (B) the Owner Trustee shall have paid or caused to be paid on or prior to the date which is 15 Business Days after such Event of Default all principal and interest on the Certificates then due (as well as any interest on overdue principal and (to the extent permitted by applicable law) interest), but not including any principal or interest becoming due on account of such Event of Default, then the failure of the Lessee to make the payment of such installment of Basic Rent or of interest on account of such installment's being overdue shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them under this Indenture by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as the case may be, shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated on an unsecured basis to all the rights of the Indenture Trustee under the Lease in respect of the payment giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment of Basic Rent (or interest thereon) actually made by the Lessee in respect of such cured payment upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. Notwithstanding anything in this Indenture or the Lease to the contrary, the Owner Participant and the Owner Trustee collectively, shall not be entitled to cure more than six (6) Events of Default (no more than three (3) of which may be consecutive) occasioned by defaults in the payment of Basic Rent. (b) If (A) there shall occur an Event of Default under the Lease for any reason other than the Lessee's failure to make any payment of an installment of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such action necessary to cure and shall have cured such Event of Default prior to the date which is 15 Business Days after such Event of Default, then the failure of the Lessee to perform such covenant, condition or agreement, the observance or performance of which was accomplished by the Owner Trustee hereunder shall not constitute or result in an Indenture Event of Default under this Indenture and any declaration based solely on the same shall be deemed to be automatically rescinded. Nothing contained in the preceding sentence shall be deemed to entitle the Owner Trustee or the Owner Participant to exercise any rights and powers or pursue any remedies pursuant to Article 17 of the Lease or otherwise except as set forth in this Indenture, and except that the Owner Trustee or the Owner Participant may attempt to recover any amount paid by it or them in effecting such cure by demanding of the Lessee payment of such amount, plus any interest due, or by commencing an action at law against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee pursuant to Section 17.01(a)(v), but only said Section 17.01(a)(v), of the Lease. Upon curing any such Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall be subrogated to all the rights of the Indenture Trustee under the Lease in respect of the payment, agreement or covenant giving rise to such Event of Default, and any right to any interest in respect of the same, and shall be entitled to any payment or other performance upon receipt by the Indenture Trustee; provided that no such amount shall be paid to the Owner Trustee or the Owner Participant until all amounts then due and payable to each Certificate Holder hereunder and thereunder shall have been paid in full and no Indenture Event of Default shall have occurred and be continuing. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE Section 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof. Section 9.02. Duties and Responsibilities of the Indenture Trustee; During an Indenture Event of Default; Prior to an Indenture Event of Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read in to this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificate or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Trust Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Event of Default shall have occurred and be continuing and, after the latest date on which the Owner Trustee may cure such Event of Default pursuant to Section 8.03 hereof, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Article 17 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary duly to discharge all Liens on any part of the Trust Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Trust Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Trust Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Article 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 6.03(e) of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. (e) The Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Lessee directly to such Holder. Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security 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, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. Section 9.04. Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of the trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officer's Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 9.08. Replacement Airframes and Replacement Engines. At any time and from time to time any Airframe or Engine which has been subject to an Event of Loss and may, or is required to, be replaced under Section 10.03, 11.03 or 11.04 of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe subject to the Event of Loss including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of and have good and marketable title to such Replacement Airframe free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Transportation Code or under the law then applicable to the registration of the Airframe subject to the Event of Loss and that an airworthiness certificate has been duly issued under the Transportation Code (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Article 13 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the Replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value of the Replacement Airframe as of the date of such certificate is not less than the value of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and such Lien will be a first priority security interest in favor of the Indenture Trustee; and (x) that each of the conditions specified in Section 11.03 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine subject to the Event of Loss including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Indenture and Security Agreement Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Liens permitted under Section 6.01 of the Lease, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine; and (vii) that each of the conditions specified in Section 10.03, 11.03 or 11.04 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and an Indenture and Security Agreement Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Davis Polk & Wardwell, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Transportation Code or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine and the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe or Replacement Engine, provided, that such opinion need not be to the effect specified in the foregoing clause to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred. Section 9.09. Indenture and Security Agreement Supplement for Replacements. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.03 or Article 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 10.03 or Article 11 of the Lease, to execute and deliver an Indenture and Security Agreement Supplement as contemplated by Section 9.08(3) hereof and, provided no Event of Default shall have occurred and be continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. Section 9.10. Effect of Replacement. In the event of the substitution of a Replacement Airframe or a Replacement Engine as contemplated by Section 10.01 or Article 11 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same Airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Trust Indenture Estate and shall have a priority claim on the Trust Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim. The Indenture Trustee agrees that it shall have no right against any Holder, SSB or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS Section 10.01. Evidence of Action Taken by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent by specifying such record date in an Officer's Certificate delivered to the Indenture Trustee. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. Section 10.02. Proof of Execution of Instruments and of Holding of Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. Section 10.03. Holders to Be Treated as Owners. Prior to due presentment for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. Section 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, SSB, the Lessee or by any Affiliate thereof shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has actual knowledge that certain Certificates are so owned by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or SSB shall such Certificates be so disregarded; and provided further that if all Certificates which would be deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee or the Owner Participant or by any Affiliate thereof, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant, SSB or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice, unless the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee promptly an Officer's Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept such Officer's Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. Section 10.05. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Department and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. Section 10.06. ERISA. Any Person, other than the Subordination Agent and the Pass Through Trustee, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Lessor's Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (a) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (b) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the terms of Article 8 or Article 9 of the Participation Agreement from the Lessee's indemnity to the Indenture Trustee under said Articles; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense. The Indenture Trustee shall be entitled to indemnification, from the Trust Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Trust Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall, so long as no Indenture Event of Default shall have occurred and be continuing, be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES Section 12.01. Notice of Successor Owner Trustee. In the case of any appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. Section 12.02. Resignation and Removal of Indenture Trustee; Appointment of Successor. (a) The Indenture Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Majority in Interest of the Certificate Holders or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, the Majority in Interest of the Certificate Holders, or the Owner Trustee, with the consent of the Lessee and the Majority in Interest of the Certificate Holders, may appoint a successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 hereof and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee, appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.13 hereof, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04 hereof. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a bank or trust company organized and doing business under the laws of the United States of America or any state or the District of Columbia having a combined capital and surplus of at least $100,000,000 or (y) a bank or trust company whose obligations hereunder are fully guaranteed by a direct or indirect parent thereof having a combined capital and surplus of at least $100,000,000 and (ii) a Citizen of the United States authorized under applicable law to exercise corporate trust powers and subject to supervision of examination by Federal, state or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02 hereof. Section 12.04. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 12.02 hereof shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI hereof. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 12.03 hereof. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02 hereof. Section 12.05. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 12.06. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Trust Indenture Estate, to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee, as the case may be. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS Section 13.01. Supplemental Indentures Without Consent of Holders. The Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee, without consent of the Holders, may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as it and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of not less than the Majority in Interest of Certificate Holders to waive such an Indenture Event of Default; (d) to surrender any right or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframe or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of subjecting Replacement Airframe or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to provide for the issuance under this Indenture of Certificates in coupon form (including Certificates registrable as to principal only) and to provide for exchangeability of such Certificates with Certificates issued hereunder in fully registered form, and to make all appropriate changes for such purpose; (h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation Agreement; (i) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders; and (j) to effect the amendments contemplated by Section 2.03 of the Participation Agreement, subject to the limitations set forth therein. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any such supplemental indenture may be executed without the consent of the Holders of Outstanding Certificates, notwithstanding any of the provisions of Section 13.02 hereof. Section 13.02. Supplemental Indentures With Consent of Holders. With the consent (evidenced as provided in Article X) of the Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder and each Liquidity Provider, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as among Holders of different Series of Certificates or as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a Make-Whole Premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend any indemnities in favor of any Holder or in favor of or to be paid by the Owner Participant (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Trust Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee and the Lessee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee, the Indenture Trustee and the Lessee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 13.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. Section 13.05. Notation on Certificates in Respect of Supplemental Indentures. Certificates authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. Section 13.06. No Request Necessary for Lease Supplement or Indenture and Security Agreement Supplement. Notwithstanding anything contained in Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject a Replacement Airframe or Replacement Engine thereto or to execute and deliver an Indenture and Security Agreement Supplement pursuant to the terms hereof. Section 13.07. Notices to Liquidity Providers. Any request made to any Holder for consent to any amendment, supplement or waiver pursuant to Section 7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 14.01. Satisfaction and Discharge of Indenture; Termination of Indenture. If at any time after (a) the Owner Trustee shall have paid or caused to be paid the principal of and interest on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07 hereof) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of prepayment by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04 hereof) or Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (A) rights of registration of transfer and exchange, and the Owner Trustee's right of optional prepayment pursuant to Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (C) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (D) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (E) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officer's Certificate and an Opinion of Counsel (covering such matters reasonably requested by, and in form and substance reasonably satisfactory to, the Indenture Trustee) and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and Make-Whole Premium, if any, and all other amounts due hereunder and under all Certificates and provided that there shall then be no other amounts due to the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in trust and applied by it to the prompt payment, either directly or through any Paying Agent, to the Holders of the particular Certificates for the payment or prepayment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and Make-Whole Premium, if any, but such money need not be segregated from other funds except to the extent required by law. Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 14.04. Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or Make-Whole Premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or Make-Whole Premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no longer be in effect, to the Owner Participant) by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee (or the Owner Participant) for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of SSB (or its permitted successors or assigns), in the Trust Agreement. Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Trust Indenture Estate. Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding. Any sale or other conveyance of all or any part of the Trust Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. Section 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Holders and Liquidity Providers. Nothing in this Indenture, whether express or implied, shall be construed to give to any person other than SSB, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, each Liquidity Provider and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. Section 15.05. No Action Contrary to the Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. Section 15.06. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy, and (a) if to the Owner Trustee, addressed to it at its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371, (b) if personally delivered to the Indenture Trustee, addressed to it at its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone: (801) 246-5630, facsimile: (801) 246-5053 or (c) if to the Owner Participant, a Liquidity Provider or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party if any, set forth in Section 14.01 of the Participation Agreement. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at such Holder's last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Owner Trustee and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Section 15.07. Officer's Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Lessee or the Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (a) an Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of SSB may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or SSB, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or SSB, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or SSB or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. Section 15.08. Severability. Any provision of this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 15.09. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. Section 15.10. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Trust Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 15.12. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Owner Participant, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed this ____ day of ____, 1998 by their respective officers thereunto duly authorized and acknowledge that this Indenture has been made and delivered in the City of New York, and this Indenture shall be effective only upon such execution and delivery. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By --------------------------------------- Name: Greg A. Hawley Title: Vice President Exhibit A to Trust Indenture and Security Agreement -------------------------------------- Indenture and Security Agreement Supplement No. ___ Indenture and Security Agreement Supplement No. ___ (Federal Express Corporation Trust No. N682FE) dated ________, ____, of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as owner trustee (herein called the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Trust Agreement") between State Street Bank and Trust Company of Connecticut, National Association and the Owner Participant named therein. W I T N E S S E T H : ------------------- WHEREAS, the Trust Agreement provides for the execution and delivery of this Indenture and Security Agreement Supplement which shall particularly describe the Aircraft and any Replacement Airframe or Replacement Engine included in the property covered by the Trust Agreement. WHEREAS, the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Indenture") between the Owner Trustee and First Security Bank, National Association (herein called the "Indenture Trustee") provides for the execution and delivery of an Indenture and Security Agreement Supplement substantially in the form of this Indenture and Security Agreement Supplement No. __, which Supplement shall particularly describe the Aircraft included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee. WHEREAS, the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Indenture and Security Agreement Supplement No. 1, and this Indenture and Security Agreement Supplement No. 1, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement No. 1 with the Federal Aviation Administration as one document.(1) WHEREAS, the Indenture and Indenture and Security Agreement Supplement No. ___ dated _________________, ______ (the Indenture being attached to and made a part of such Indenture and Security Agreement Supplement and filed therewith) have been duly recorded pursuant to Subtitle VII of Title 49 of the United States Code, on ____________, _____, as one document and have been assigned Conveyance No. _________.(2) - ------------ (1) This recital is to be included only in the first Indenture Supplement. (2) This recital is not to be included in the first Indenture Supplement. NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt payment of the principal of and Make-Whole Premium, if any, and interest on, and all other amounts due with respect to, all Outstanding Certificates under the Indenture and all other amounts due hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders contained in the Indenture, in the Lease, in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders and for the uses and purposes and subject to the terms and provisions of the Indenture and the Certificates, and in consideration of the premises and of the covenants contained in the Indenture, and of the purchase of the Certificates by the Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a security interest in, and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security interest in, and confirm, unto the Indenture Trustee, its successors and assigns, in trust for the equal and ratable security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, a first priority security interest in and mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: Airframe One (1) Airframe identified as follows: FAA Manufacturer's Registration Serial Manufacturer Model Number Number - ------------ ----- ------------ -------------- together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time belonging thereto, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES Two (2) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows: Manufacturer's Serial Manufacturer Model Number - ------------ ----- -------------- together with all equipment and accessories belonging thereto, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property described above, and all property which shall hereafter become physically attached to or incorporated in the property described above, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, in the trust created by the Indenture, and subject to all of the terms, conditions, provisions and limitations set forth in the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease Supplement (other than Excepted Payments, if any) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft/Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee and covered by all the terms and conditions of the Trust Agreement, subject to the Lien of the Indenture. IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed as of the date first written above by one of its officers thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as specifically set forth herein but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President Exhibit B to Trust Indenture and Security Agreement -------------------------------------- [Form of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No. ______ $_____________ EQUIPMENT TRUST CERTIFICATE (Federal Express Corporation Trust No. N682FE) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 SERIES ___ Interest Rate Maturity - ------------- -------- State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between the Initial Owner Participant named therein and State Street Bank and Trust Company of Connecticut, National Association (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Subordination Agent, or its registered assigns, the principal sum of ________________ _______________ Dollars, payable as set forth below for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding from time to time, semiannually on each January 15 and July 15, on said principal sum in like coin or currency at the rate per annum set forth above from the January 15 or the July 15, as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any January 15 or July 15 and before the following January 15 or July 15, as the case may be, this Certificate shall bear interest from such January 15 or July 15; provided that, if the Owner Trustee shall default in the payment of interest due on such January 15 or July 15, then this Certificate shall bear interest from the next preceding January 15 or July 15 to which interest on this Certificate has been paid or duly provided for. The interest so payable on any January 15 or July 15 will, except as otherwise provided in the Indenture referred to below, be paid to the person in whose name this Certificate is registered at the close of business on the January 15 or July 15 preceding such January 15 or July 15, whether or not such day is a Business Day. This Certificate shall bear interest at the Past Due Rate on any principal hereof and on any other amount payable hereunder or under the Indenture which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Indenture Trustee. Principal and interest and other amounts due hereunder shall be payable at the office or agency of First Security Bank, National Association (the "Indenture Trustee") maintained for such purpose; provided that, at the option of the Indenture Trustee or its Paying Agent, interest may be paid by mailing a check therefor payable to or upon the written order of the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without (provided that payment is made on such next succeeding Business Day) additional interest thereon for the period of such extension. State Street Bank and Trust Company of Connecticut, National Association and First Security Bank, National Association are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee. Any Person, other than the Subordination Agent, who is acquiring the Certificates will be deemed to represent and warrant that (i) no assets of an employee benefit plan subject to Title I of ERISA or an individual retirement account or plan subject to Section 4975 of the Code, or any trust established under any such plan or account, have been used to acquire or hold any of the Certificates, or (ii) that one or more administrative or statutory exemptions from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code applies to its purchase and holding of the Certificates such that its purchase and holding of the Certificates will not result in a non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of the Code. This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (herein as amended, supplemented or modified from time to time called the "Indenture") between the Owner Trustee and the Indenture Trustee. Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Indenture. The principal amounts of the Certificates are payable as set forth on Schedule I attached hereto. The Certificates are subject to redemption in part, pro rata (based on the face amount thereof), in each case through mandatory sinking fund redemptions providing for the redemption on the Sinking Fund Redemption Dates of the aggregate principal amounts set forth on Schedule I attached hereto, together with interest accrued thereon to the applicable Sinking Fund Redemption Date, but without Make-Whole Premium. Except as expressly provided in the Indenture, all payments of principal, Make-Whole Premium, if any, and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Lessor's Estate to the extent included in the Trust Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for an Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will (except as aforesaid) look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that neither the Owner Participant, the Owner Trustee, SSB nor the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture, in the case of SSB, the Owner Trustee and the Indenture Trustee. The Certificates are subject to prepayment in the circumstances and at the prices determined as set forth in the Indenture. If, in accordance with and subject to the satisfaction of the conditions set forth in Section 7.11 of the Participation Agreement, the Lessee shall assume all of the obligations of the Owner Trustee hereunder, under the Certificates and all other Operative Agreements, the Owner Participant and the Owner Trustee shall (except for prior acts) be released and discharged from any further obligations hereunder and under the Certificates and all other Operative Agreements (except any obligations that have accrued prior to such assumption). If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived the Majority in Interest of Holders. Any such consent or waiver shall be conclusive and binding upon the Holder of this Certificate and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, an Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease, but the Owner Trustee and the Owner Participant, collectively, may not cure more than three consecutive such failures or more than six such failures in total. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease. (A) If an Event of Default shall have occurred and be continuing for more than 180 days or the Certificates shall have been accelerated or (B) an Event of Default shall have occurred and be continuing for not more than 180 days and the Certificates shall not have been accelerated, the Owner Participant (or the Owner Trustee on behalf of the Owner Participant) may: (1) direct the Owner Trustee to cause the prepayment of all the Outstanding Certificates by notifying the Indenture Trustee of such election and depositing the sum of amounts contemplated by paragraph "first" under Section 5.03 of the Indenture and the aggregate Prepayment Price of all such Certificates with the Indenture Trustee for distribution to the Holders; or (2) purchase all of the Outstanding Certificates by paying to the Indenture Trustee an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates, plus accrued interest on such amount to the date of purchase and any Make-Whole Premium applicable to each Outstanding Certificate, if such purchase occurs prior to the Premium Termination Date for such Outstanding Certificate (in the case of a purchase pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture) plus all other sums due any Holder or the Indenture Trustee under the Indenture, the Participation Agreement or the Lease. The right of the Holder hereof to institute an action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest and Make-Whole Premium, if any, on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain an office or agency where the Certificates may be presented for payment and a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Series and Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Series and Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge shall be levied for any such registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. The indebtedness evidenced by this Certificate is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Certificate](1), [Series A and Series B Certificates](2) and this Certificate is issued subject to such provisions. The Holder of this Certificate, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee such Holder's attorney-in-fact for such purpose.(*) - ------------ (1) To be inserted in the case of a Series B Certificate. (2) To be inserted in the case of a Series C Certificate. (*) To be inserted for each Certificate other than any Series A Certificate. [In connection with the delivery of an aircraft under any Related Indenture prior to the Delivery Date of the Aircraft, the outstanding principal amount of this Series C Certificate may be increased, provided, that the aggregate principal amount of this Series C Certificate, together with the aggregate principal amount of "Series C Certificates" under each Other Indenture (collectively, the "Total Aggregate Principal Amount of Series C Certificates") outstanding after giving effect to such increase shall in no event exceed the Total Aggregate Principal Amount of Series C Certificates outstanding on the Certificate Closing Date, and provided, further, that after giving effect to such increase the loan to aircraft value ratio in respect of this Series C Certificate shall be in accordance with the requirements set forth in the first paragraph of Schedule VI to the Participation Agreement, and provided, further, that the Collateral Account is increased by a corresponding amount.](2) The Owner Trustee shall have the right, on the Reoptimization Date to modify Schedule I attached hereto subject to the terms and conditions set forth in Section 2.03(b) of the Participation Agreement. To give effect to the foregoing, Schedule I attached hereto and Schedule I to the Indenture shall be amended accordingly. The Indenture Trustee shall deliver such amendments to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts. To the extent that such amendment of the Indenture occurs later than the Delivery Date, the Indenture, as amended, shall, if required, be duly filed for recordation with the Aeronautics Authority. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York. This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Federal Express Corporation Trust No. N682FE) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: ________, ____ STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By --------------------------------------- Name: Paul D. Allen Title: Vice President [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Federal Express Corporation Trust No. N682FE) referred to in the within mentioned Indenture. Dated: ________, ____ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By --------------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I TO CERTIFICATE Principal Amount ---------------- Series [_] Sinking Fund Certificates with a Redemption Date Maturity of --------------- [ ] ------------------ SCHEDULE I SCHEDULE OF PRINCIPAL PAYMENTS
Principal Amount ---------------- Series A Series B Series C Certificates with a Certificates with a Certificates with a Sinking Fund Maturity of Maturity of Maturity of Redemption Date January 15, 2020 January 15, 2018 January 15, 2016 - ------------------------------------------------------------------------------------------------- July 15, 1999 $ 0 $ 913,431 $ 1,550,848 January 15, 2000 783,851 302,703 0 January 15, 2001 1,042,984 119,398 0 January 15, 2002 1,042,984 200,433 0 January 15, 2003 1,042,984 287,211 0 January 15, 2004 1,042,984 391,119 1,166,190 January 15, 2005 1,042,984 391,119 1,486,692 January 15, 2006 1,042,984 391,119 636,940 January 15, 2007 1,042,984 391,119 524,123 January 15, 2008 1,042,984 391,119 543,845 January 15, 2009 1,042,984 565,770 264,853 January 15, 2010 1,042,984 492,038 0 January 15, 2011 1,042,984 560,277 0 January 15, 2012 1,042,984 632,014 0 January 15, 2013 1,042,984 839,413 0 January 15, 2014 1,042,984 1,633,679 1,243,943 January 15, 2015 1,042,984 0 3,257,292 January 15, 2016 1,042,984 0 3,626,274 January 15, 2017 1,042,984 3,886,302 0 January 15, 2018 4,341,630 907,736 0 January 15, 2019 5,664,039 0 0 January 15, 2020 5,986,752 0 0
SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N682FE and Manufacturer's serial number 800, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N682FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on December 1, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N682FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 30, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N682FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. EX-4.C 7 EXHIBIT 4.c - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48481, REGISTRATION NO. N585FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 3 Section 2.02. (a) Certificates.......................................... 4 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 6 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 9 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 18 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 27 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 28 Section 6.02. Offering by Lessee....................................... 34 Section 6.03. Certain Covenants of Lessee.............................. 34 Section 6.04. Survival of Representations and Warranties............... 42 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 42 Section 7.02. Citizenship.............................................. 43 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 44 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 47 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 51 Section 7.07. Releases from Indenture.................................. 51 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 55 Section 7.13. Compliance with Trust Agreement, Etc..................... 55 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 57 Section 8.02. After-Tax Basis.......................................... 62 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 63 Section 8.05. Refunds.................................................. 65 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 66 Section 8.08. Payment of Taxes......................................... 66 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 70 Section 9.03. Subrogation.............................................. 71 Section 9.04. Notice and Payment....................................... 71 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 72 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 73 Section 9.09. Interest................................................. 73 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 73 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 76 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 78 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 78 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 79 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 80 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 83 Section 17.03. Counterparts............................................ 85 Section 17.04. No Oral Modifications................................... 85 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee................................ 86 Section 17.08. Severability............................................ 86 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 87 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from the Lessee; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit E hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Engine Warranty Assignment and the Bills of Sale, the Owner Trustee will purchase, and receive title to, the Aircraft from the Lessee and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by the Lessee to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be a McDonnell Douglas MD-11F airframe having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) the Lessee shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Modification Agreement of any warranties thereunder, the transfer by the Initial Owner Participant to the Owner Participant of its Beneficial Interest and the transfer of title to the Aircraft from the Lessee to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price, or such lesser amount referred to in the proviso to this Section 3.02(a), and (B) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from the Lessee, and the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. In addition to the foregoing rights of the Lessee to provide a notice of prepayment, if the Lessee receives a commitment from a prospective owner participant pursuant to which the Lessee would have the right not to enter into the lease if, as a result of a change in tax law prior to the Delivery Date, the Net Present Value of Rents would increase above a specified amount, then in the event that such a change in tax law does so increase the Net Present Value of Rents, the Lessee shall have the right to provide the notice of prepayment referred to in the first proviso to the preceding sentence. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Modification Agreement; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; and (xii) the Bills of Sale; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of the FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include the Bills of Sale; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of the FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of the FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of the FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by the Lessee to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Modification Agreement, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, the FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, the FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by the Lessee, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Bills of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Modification Agreement, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4024691358% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, the Bills of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than September 15, 1998, or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N585FE Interest Rate: 6.720% Maturity: July 15, 2020 Principal Amount: $31,384,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N585FE Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $13,094,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N585FE Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $16,665,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N585FE and Manufacturer's serial number 48481, together with three General Electric CF6-80C2-D1F engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N585FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on January 15, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N585FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 14, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N585FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2013 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $61,143,000 Letter of Credit Maximum Stated Amount $5,500,000 SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N585FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N585FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N585FE Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Lease Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iii) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (iv) that certain Trust Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N585FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers three GE CF6-80C2-D1F series engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-6327A, dated as of June 28, 1991 between the Engine Manufacturer and American Airlines, Inc. (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N585FE Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from the Lessee, as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N585FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N585FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions Airframe, Engines and Aircraft One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48481 and U.S. Registration No. N585FE (the "Airframe") and three (3) General Electric CF6-80C2-D1F aircraft engines bearing manufacturer's serial numbers ___-___, ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement II, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement No. 6-6327A dated as of June 28, 1991 (the "GTA") by and between the Engine Manufacturer and American Airlines, Inc. ("American"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan; such Engine Warranties having been assigned to Federal Express Corporation ("Fed Ex" or the "Assignor") by American on __________, 1998. C. Engine means each of the CF6-80C2-D1F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-D1F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor" or the "Assignee") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. The Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Thirteen (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 4 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Paul D. Allen Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Lease Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and State Street Bank and Trust Company of Connecticut, National Association, as Lessor (as in effect from time to time, the "Lease") and (ii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Lease covers three GE CF6-80C2-D1F series engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively, (the "Engines") as installed on the McDonnell Douglas MD-11F series aircraft bearing Manufacturer's serial number 48481 (the "Aircraft"). In connection with such Lease, reference is made to the General Terms Agreement No. 6-6327A dated as of June 28, 1991, between the Engine Manufacturer and American Airlines, Inc. (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-D1F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain McDonnell Douglas MD-11F series aircraft, including the Aircraft. Recognizing that (i) American Airlines, Inc. has assigned all rights to the Engine Warranties in respect of the Engines to Fed Ex and (ii) the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Thirteen (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: ============================================================================== PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) Dated as of May 1, 1998 Amended and Restated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee BMO LEASING (U.S.), INC., Owner Participant MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Original Loan Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ------------------------------ LEVERAGED LEASE OF ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48505, REGISTRATION NO. N590FE ============================================================================== TABLE OF CONTENTS Page ---- Initial Recitals........................................................ 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 Section 2.01. Transfer of Funds. ...................................... 4 Section 2.02. Certificates............................................. 7 Section 2.03. Owner Participant's Instructions to Owner Trustee........ 7 ARTICLE 3 EXTENT OF INTEREST OF ORIGINAL LOAN PARTICIPANT Section 3.01. Extent of Interest of Original Loan Participant. ........ 7 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent..................................... 8 Section 4.02. Opinion of Special Aviation Counsel...................... 18 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 19 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 19 Section 6.02. Offering by Lessee....................................... 25 Section 6.03. Certain Covenants of Lessee.............................. 25 Section 6.04. Survival of Representations and Warranties............... 33 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 33 Section 7.02. Citizenship. ............................................ 34 Section 7.03. Representations, Warranties and Covenants of Owner Participant......................................... 36 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee................................... 39 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee................................... 42 Section 7.06. Indenture Trustee's Notice of Default.................... 43 Section 7.07. Releases from Indenture.................................. 43 Section 7.08. Covenant of Quiet Enjoyment.............................. 43 Section 7.09. Original Loan Participant's and Pass Through Trustee's Representations and Warranties. .................... 44 Section 7.10. Survival of Representations, Warranties and Covenants.... 45 Section 7.11. Lessee's Assumption of the Certificates.................. 45 Section 7.12. Indebtedness of Owner Trustee............................ 47 Section 7.13. Compliance with Trust Agreement, Etc..................... 47 Section 7.14. Subordination Agent's Representations, Warranties and Covenants. ......................................... 48 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 50 Section 8.02. After-Tax Basis.......................................... 55 Section 8.03. Time of Payment.......................................... 56 Section 8.04. Contests................................................. 56 Section 8.05. Refunds.................................................. 58 Section 8.06. Lessee's Reports......................................... 59 Section 8.07. Survival of Obligations.................................. 59 Section 8.08. Payment of Taxes......................................... 59 Section 8.09. Reimbursements by Indemnitees Generally.................. 60 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 60 Section 9.02. After-Tax Basis.......................................... 63 Section 9.03. Subrogation.............................................. 64 Section 9.04. Notice and Payment....................................... 64 Section 9.05. Refunds.................................................. 65 Section 9.06. Defense of Claims........................................ 65 Section 9.07. Survival of Obligations.................................. 66 Section 9.08. Effect of Other Indemnities.............................. 66 Section 9.09. Interest................................................. 66 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 67 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 70 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 71 Section 12.02. Interest of Holders of Certificates..................... 71 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 72 Section 13.02. Further Assurances...................................... 72 Section 13.03. No Retroactive Application. ............................ 72 Section 13.04. Pass Through Trustee's and Subordination Agent's Acknowledgement.................................... 72 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 73 ARTICLE 15 REFINANCING/REOPTIMIZATION Section 15.01. Refinancing............................................. 74 Section 15.02. Reoptimization.......................................... 77 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. Owner for Federal Tax Purposes.......................... 79 Section 17.02. [Reserved].............................................. 79 Section 17.03. Counterparts............................................ 79 Section 17.04. No Oral Modifications................................... 79 Section 17.05. Captions................................................ 80 Section 17.06. Successors and Assigns.................................. 80 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee........................... 80 Section 17.08. Severability............................................ 80 Section 17.09. Public Release of Information........................... 81 Section 17.10. Certain Limitations on Reorganization................... 81 Section 17.11. GOVERNING LAW........................................... 81 Section 17.12. Section 1110 Compliance................................. 82 Section 17.13. Reliance of Liquidity Providers. ....................... 82 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 82 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List EXHIBIT A(1)(a) Opinion of Lessee's Counsel EXHIBIT A(1)(b) Opinion of Lessee's Special Counsel EXHIBIT A(2)(a) Opinion of Owner Participant's and Owner Participant Guarantor's Special Counsel EXHIBIT A(2)(b) Opinion of Owner Participant's and Owner Participant Guarantor's Counsel EXHIBIT A(3) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(4) Opinion of Owner Trustee's Special Counsel EXHIBIT A(5) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(6)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(6)(b) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(7) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee"), BMO LEASING (U.S.), INC., a Delaware corporation (herein, together with its successors and permitted assigns, the "Owner Participant"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (together with its successors and permitted assigns, the "Original Loan Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee entered into the Original Participation Agreement, providing for the sale and lease of the Aircraft that was delivered on the Delivery Date; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Participant entered into the Original Trust Agreement relating to the Aircraft with SSB in its individual capacity, pursuant to which SSB agreed, among other things, to hold the Lessor's Estate in trust for the benefit of the Owner Participant; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Indenture Trustee entered into the Original Indenture, for the benefit of the Original Loan Participant, pursuant to which the Owner Trustee issued to the Original Loan Participant the Original Loan Certificates as evidence of the loans made by the Original Loan Participant to the Owner Trustee, the proceeds of which were used by the Owner Trustee to pay a portion of the Purchase Price for the Aircraft; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Lessee entered into the Original Lease relating to the Aircraft, whereby, subject to the terms and conditions set forth in said Lease, the Owner Trustee agreed to lease the Aircraft to the Lessee, and the Lessee agreed to lease the Aircraft from the Owner Trustee, such lease of the Aircraft being evidenced by the execution and delivery of the Lease Supplement; WHEREAS, Article 15 of the Original Participation Agreement permits a Refinancing of the Original Loan Certificates subject to the satisfaction of the conditions specified in Section 15.01 thereof, and Section 3.04 of the Original Lease contemplates the adjustment of the percentages for Basic Rent, Stipulated Loss Value, EBO Price and Termination Value in the event of such a Refinancing, and the Lessee has requested that the Owner Trustee effect such a Refinancing and adjustment; WHEREAS, in order to facilitate such Refinancing, the Lessee is concurrently entering into an Underwriting Agreement, which relates to three series of Pass Through Certificates that will be issued by the Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular Series and having a particular Maturity that will be issued under the Indenture; WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of the Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto, the proceeds of which purchase in turn will be applied to the Refinancing in full of the outstanding principal amount of the Original Loan Certificates; WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee have agreed, subject to the terms and conditions hereinafter provided, to amend and restate, and to add each of the Pass Through Trustee and the Subordination Agent as a party to, the Original Participation Agreement; WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement; WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts; WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee have agreed, to the extent they are parties thereto and, subject to the terms and conditions hereinafter provided, to amend and restate the Original Indenture, to amend and restate the Original Lease, to amend and restate the Original Ancillary Agreement I, to amend the Original Tax Indemnity Agreement and to amend and restate the Original Trust Agreement, each such amendment and restatement to be executed and delivered simultaneously with the purchase of the Certificates by the Pass Through Trustee for the Pass Through Trusts and the Refinancing in full of the Original Loan Certificates; and WHEREAS, FSC is an Affiliate of the Owner Participant, and is a foreign sales corporation, as defined in Section 922 of the Code, acting as a commission agent on behalf of the Owner Participant with respect to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree, subject to the terms and conditions hereinafter provided, that the Original Participation Agreement be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; REFUNDING THE ORIGINAL LOAN CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Refunding Date the following events shall occur in the order set forth below: (i) the Lessee shall on behalf of the Owner Trustee execute a wire transfer or intra-bank transfer in favor of the Agent (as a prepayment of the portion of Basic Rent allocable to the period from the Closing Date through the Refunding Date) in the amount of all accrued and unpaid interest on the Original Loan Certificates to but excluding the Refunding Date, which transfer shall constitute the payment of all such accrued and unpaid interest; (ii) the Lessee shall on behalf of the Owner Trustee execute a wire transfer or intra-bank transfer in favor of the Agent as Supplemental Rent in the amount of any Breakage Costs required to be paid pursuant to the Original Indenture which transfer shall constitute the payment of all such Breakage Costs; (iii) for each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall pay on behalf of the Owner Trustee in the manner specified in paragraph (iv) below, an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture; (iv) the aggregate amount payable by the Pass Through Trustee pursuant to paragraph (iii) above shall be payable by wire transfer or intra-bank transfer in favor of the Agent on behalf of the Owner Trustee in the amount of the outstanding principal amount of the Original Loan Certificates; (v) the Agent shall apply the amounts received by it under paragraphs (i), (ii) and (iv) of this subsection (b) to prepay the Original Loan Certificates in full in accordance with Sections 2.06 and 2.10 of the Original Indenture; and (vi) the Owner Trustee shall cause the Certificates to be delivered to the applicable Pass Through Trustee in accordance with Section 2.02 hereof. On the Refunding Date concurrently with the events specified in clauses (iii) through (v) of this Section 2.01(b), the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not a party thereto), the Indenture, the Lease and the Trust Agreement, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. The Owner Participant hereby requests and directs the Owner Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions specified herein. The Original Loan Participant by its execution and delivery hereof, requests and directs the Indenture Trustee to execute and deliver this Agreement and concurrently with the events specified in clauses (iii) through (v) of this Section 2.01(b) and subject to the terms and conditions hereof to take the actions contemplated herein. The parties hereto, including, without limitation, the Original Loan Participant, confirm that, as provided in Section 2.06 of the Original Indenture, upon payment in full of the principal amount, Breakage Costs, if any, and interest on the Original Loan Certificates and all other sums then payable to the Original Loan Participant under the Original Agreements to the extent specified in subsection (c) below, the Original Loan Participant shall have no further interest in, or other right or obligation with respect to, the Trust Indenture Estate, the Original Agreements or the Operative Agreements (it being understood that the foregoing shall not limit or detract from any claim that the Original Loan Participant may have under Article 8 or 9 or Section 10.01(a)(ii) hereof or of the Original Participation Agreement) and, accordingly, have no obligation to, and will not attempt to direct any future actions of the Indenture Trustee with respect to the Trust Indenture Estate, provided that the rights and obligations of the Original Loan Participant shall, until the payment in full of such amounts to the Agent on behalf of the Original Loan Participant on the Refunding Date, be governed by the Original Participation Agreement and the other Operative Agreements contemplated thereby or in effect immediately prior to the effectiveness of this Agreement and shall, upon such payment and thereafter, be governed by this Agreement. The Lessee hereby consents to the foregoing. (c) Not less than three (3) Business Days prior to the Refunding Date, the Agent on behalf of the Original Loan Participant shall give notice in writing to the parties hereto of the principal amount, Breakage Costs, if any, and interest on and all other amounts due on the Refunding Date under the Original Loan Certificates and all other sums payable on the Refunding Date to the Original Loan Participant under the Original Agreements, such notice to be deemed final and binding on the Original Loan Participant as to the respective amounts of principal, Breakage Costs, if any, and interest when given; provided that the expected Refunding Date, at the time such notice is given, is the same as the Refunding Date. (d) On the Refunding Date, subject to (i) the giving of the written notice referred to in Section 2.01(c) above to the Indenture Trustee and the Original Loan Participant, (ii) the receipt by the Original Loan Participant of the funds referred to in Section 2.01(b)(v) above and (iii) compliance with the provisions of Article 15 of the Original Participation Agreement and Section 2.10(c) of the Original Indenture (including the Refinancing in full of the Original Loan Certificates), the Original Loan Participant shall deliver the Original Loan Certificates to the Indenture Trustee for cancellation and delivery to the Owner Trustee. (e) The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the Refinancing of the Original Loan Certificates (together, the "Closings") shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. (f) All payments pursuant to this Section 2.01 shall be made in immediately available funds. (g) In the event that the Refunding Date and the actions contemplated to occur on such date pursuant to subsection (d) of this Section 2.01 do not occur on or before July 30, 1998, then the rights and obligations of the parties to the Original Participation Agreement, including, without limitation, the Original Loan Participant and the Indenture Trustee, shall be governed by the Original Participation Agreement and the other Operative Agreements contemplated thereby or in effect immediately prior to the effectiveness of this Agreement and this Agreement shall be of no further force and effect, except that the Lessee shall be obligated hereby to pay all fees and expenses of the Original Loan Participant, the Indenture Trustee, the Owner Participant, the Owner Participant Guarantor, the Owner Trustee, the Pass Through Trustee and their respective counsel relating to the transactions contemplated hereby. Each of the parties hereto agrees to execute and deliver to the other parties such documents and instruments as may be necessary to give effect to the foregoing provisions of this subsection (g). Section 2.02. Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Refunding Date, the Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Refunding Date and shall bear interest from the Refunding Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. Section 2.03. Owner Participant's Instructions to Owner Trustee. The Owner Participant agrees that the issuance of Certificates in accordance with the terms hereof shall constitute, without further act, authorization and direction by the Owner Participant to the Owner Trustee to take the action specified in Section 1.01 of the Trust Agreement and confirmation that all conditions to closing set forth in Article 4 hereof were either met to the satisfaction of the Owner Participant or, if not so met, were in any event waived by it. ARTICLE 3 EXTENT OF INTEREST OF ORIGINAL LOAN PARTICIPANT Section 3.01. Extent of Interest of Original Loan Participant. Delivery of the Original Loan Certificates by the Original Loan Participant to the Indenture Trustee for cancellation on the Refunding Date shall be conclusive evidence of receipt by the Original Loan Participant of all amounts then due and payable to the Original Loan Participant in respect of principal of, Breakage Costs, if any, and interest on the Original Loan Certificates under the Original Agreements (it being understood that the foregoing shall not limit or detract from any claim the Original Loan Participant may have under Article 8 or 9 or Section 10.01(a)(ii) hereof or of the Original Participation Agreement). ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent. The obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Refunding Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Refunding Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Refunding Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Refunding Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. No change shall have occurred after the date of this Agreement in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Refunding Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Refunding Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Refunding Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent or the Owner Participant, as the case may be, of such documents shall have been delivered to the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) in the case of the Owner Participant only, Amendment No. 1 to the Original Tax Indemnity Agreement; (iv) the Trust Agreement; (v) each Ancillary Agreement; (vi) the Owner Participant Guaranty; (vii) the Owner Trustee Guaranty; (viii) the Intercreditor Agreement; and (ix) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates. (e) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee, each Liquidity Provider and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee, each Liquidity Provider and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (f) Financing Statements. (i) UCC financing statements covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Original Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Original Loan Participant, and such financing statements shall have been duly filed in the State of Connecticut; (ii) a form UCC-3 financing statement to amend and restate each financing statement referred to in the immediately preceding sentence shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the Refinancing of the Original Loan Certificates such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture; (iii) a UCC notice filing describing the Original Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee; and (iv) a form UCC-3 financing statement to amend and restate the UCC notice filing referred to in the immediately preceding clause (iii) shall have been executed and delivered by the Owner Trustee, as lessor, and by the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and such notice filing shall concurrently with the Refinancing of the Original Loan Certificates have been duly filed in the State of Tennessee, and all other actions shall have been taken which, in the opinion of the Owner Participant, the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests created by or pursuant to the Granting Clause of the Indenture. (g) Corporate Documents. Except when such Person is the delivering party, the Owner Participant, the Owner Trustee, the Original Loan Participant, the Pass Through Trustee, the Subordination Agent, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Refunding Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Refunding Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of the Original Agreements to which it is a party, this Agreement, the Lease, the Tax Indemnity Agreement, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of incorporation and bylaws of the Owner Participant and the Owner Participant Guarantor, certified by the Secretary or an Assistant Secretary of the Owner Participant or the Owner Participant Guarantor as of the Refunding Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Refunding Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of the Original Agreements to which it is a party, this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee and the Owner Trustee Guarantor, certified by the Secretary or an Assistant Secretary of the Owner Trustee or the Owner Trustee Guarantor as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing (i) the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of the Original Agreements to which it is a party, this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby and (ii) the execution, delivery and performance by the Owner Trustee Guarantor in its individual capacity or as Owner Trustee Guarantor, as the case may be, of the Original Agreements to which it is a party, the Owner Trustee Guaranty and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee Guarantor, and each other document to be executed and delivered by the Owner Trustee Guarantor in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of the Original Agreements to which it is party, this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (vi) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vii) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Owner Participant, the Owner Trustee Guarantor and the Owner Participant Guarantor as the Indenture Trustee, the Pass Through Trustee or the Owner Participant may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Title, Airworthiness and Registration. On the Refunding Date, the following statements shall be true, and the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received evidence from the Lessee reasonably satisfactory to each such Person to the effect that: (i) the Owner Trustee has good and marketable title to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the Lease, the Indenture and the Trust Agreement concurrently with the Refinancing of the Original Loan Certificates have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) the Aircraft is registered in the name of the Owner Trustee. (i) Officer's Certificate of Lessee. On the Refunding Date, the following statements shall be true, and the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Refunding Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered at the closing pursuant hereto or thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (j) Officer's Certificates of Owner Participant and Owner Participant Guarantor. On the Refunding Date, the following statements shall be true, and the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from (i) the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Refunding Date, stating that: (A) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered at the closing pursuant hereto or thereto, are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (B) no Lessor's Liens attributable to the Owner Participant exist; and (C) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default; and (ii) from the Owner Participant Guarantor, signed by a duly authorized officer of the Owner Participant Guarantor dated the Refunding Date, stating that the representations and warranties of the Owner Participant Guarantor contained in the Owner Participant Guaranty and in any certificate delivered at the closing pursuant thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date). (k) Other Officer's Certificates. On the Refunding Date, the following statements shall be true, and the Lessee, the Owner Participant, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from (i) each of SSB and the Owner Trustee (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Refunding Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (A) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered at the closing pursuant hereto or thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (B) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (C) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens; and (ii) from the Owner Trustee Guarantor, signed by a duly authorized officer of the Owner Trustee Guarantor dated the Refunding Date, stating that the representations and warranties of the Owner Trustee Guarantor contained in the Owner Trustee Guaranty and in any certificate delivered at the closing pursuant thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date). (l) Legal Opinions. The Owner Participant, the Agent, the Original Loan Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Agent, the Original Loan Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Refunding Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Winston & Strawn, special counsel for the Owner Participant and the Owner Participant Guarantor, in the form of Exhibit A(2)(a) hereto and the General Counsel's Office of the Owner Participant and the Owner Participant Guarantor, in the form of Exhibit A(2)(b) hereto, each addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(3) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Bingham Dana LLP, special counsel for the Owner Trustee and the Owner Trustee Guarantor, in the form of Exhibit A(4) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(5) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(6)(a) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(6)(b) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee; and (viii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(7) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee. (m) Payment of Taxes. (A) all taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (f) and (h) of this Section 4.01 shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements then due and payable shall have been duly paid in full. (n) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (o) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (p) Cancellation. Following the Refinancing of the Original Loan Certificates, the Original Loan Certificates shall have been duly delivered by the Original Loan Participant to the Indenture Trustee for cancellation and delivery to the Owner Trustee. (q) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (r) Tax Law Change. In the opinion of the Owner Participant and its special counsel, no Change in Tax Law shall have occurred on or before the Refunding Date which would adversely affect the Owner's Economic Return. Section 4.02. Opinion of Special Aviation Counsel. Promptly upon the filing and, where appropriate, recording of the documents specified in 4.01(h)(iii) hereof, pursuant to the Transportation Code the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due recording of such documents and the documents identified in Section 4.01(i) of the Original Participation Agreement and (ii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby is subject to the conditions that, prior to or on the Refunding Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(vii), (h)(ii)-(iv), (j), (k) and (l)(ii)-(viii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Refunding Date: (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the Original Agreements to which it is a party, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered by the Lessee and constitutes the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.01(l)(viii) and 4.02 hereof and except for the filings referred to in Section 4.01(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Refunding Date or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the filing with and, where appropriate, recordation pursuant to the Transportation Code of the Indenture, the Trust Agreement and the Lease, (B) the filing of the financing statements referred to in Section 4.01(f) hereof and (C) the taking of possession by the Indenture Trustee of the original counterpart of the Lease and maintaining possession of the original counterpart of the Lease Supplement delivered on the Delivery Date, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Owner Trustee and the Lessee under the Original Lease, the rights of the Indenture Trustee under the Original Indenture, the beneficial interest of the Owner Participant created by the Original Trust Agreement and the interest of the Original Loan Participant created by the Original Indenture and the Indenture and Security Agreement Supplement covering the Aircraft; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997, its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998 and its Current Report on Form 8-K dated June 11, 1997, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA, except as otherwise disclosed: (i) none of the Pension Plans nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation or any successor agency or instrumentality thereto (the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or a plan subject to Section 4975 of the Code. As used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f) and 4.02 hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Refunding Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Refunding Date under Article 13 of the Lease shall have been paid by the Lessee; (q) on the Refunding Date, all sales or use taxes relating to the sale of the Aircraft by the Lessee to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) the Aircraft has been duly certificated by the FAA as to type and airworthiness; there is in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Refunding Date, the Lessee shall not be in default in the performance of any term or condition of the Engine Warranty Assignment and the GTA; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) the Aircraft is fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; (x) neither the Lessee nor any of its Affiliates is engaged principally in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds from the sale of the Certificates and/or sale of the Aircraft by the Lessee to the Owner Trustee will be used to purchase or carry any such margin stock, or to refinance any borrowing, the proceeds of which were used to purchase or carry any such margin stock; (y) there are no broker's or underwriter's fees payable in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof; and (z) the representations and warranties of the Lessee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. The Lessee represents and warrants that neither it, nor, based on representations of First Chicago Leasing Corporation, First Chicago Leasing Corporation acting on its behalf, has taken or will take any action which would subject the issuance or sale of any interest in the Lessor's Estate or the Trust Agreement to the provisions of Section 5 of the Securities Act of 1933, as amended. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 5 other institutional investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered, at the Lessee's cost and expense, all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Indenture, the Tax Indemnity Agreement, the Lease and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) The Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to remain duly registered in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2005 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, the Owner Participant, the Owner Trustee and the Indenture Trustee, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, shall not unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (C) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (D) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (E) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (F) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (G) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate in a manner satisfactory to such parties; (H) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (I) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; (J) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (K) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft and the Trust Indenture Estate, that all recordings and filings required to so perfect the Lien of the Indenture have been duly effected, and that no Liens (except Liens permitted under Section 6.01 of the Lease) shall arise by reason of such registration; and (L) that appropriate deregistration powers of attorney in favor of the Owner Trustee and the Indenture Trustee have been executed and delivered by the Lessee and any sublessee and, if necessary or desirable for the effectiveness thereof, filed with the relevant aeronautics authority; and (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(C)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Trustee, the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee or the Indenture Trustee may reasonably request; and (H) the Lien of the Indenture continues to constitute a first priority, duly perfected Lien on the Aircraft. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Refunding Date, the Lease, the Trust Agreement and the Indenture. The following documents shall be filed and, where appropriate, recorded on the Refunding Date with the Aeronautics Authority in the following order of priority: first, the Trust Agreement, second, the Indenture and third, the Lease with the Indenture attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders or the Owner Participant or the ability of the Lessee to perform its obligations under the Operative Agreements. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant, the Owner Trustee and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Indenture Trustee and the Pass Through Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review, of the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement to which it is or is to be a party shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved] (b) Owner Participant. The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. Neither the Owner Participant nor anyone authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliates of any thereof whether or not such action or inaction is purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any Certificates or any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) shall own Certificates. Section 7.02. Citizenship. (a) Generally. The Owner Trustee, in its individual capacity and as Owner Trustee, represents and warrants that it is or will be a Citizen of the United States on the Refunding Date. If the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant represents, warrants and covenants that (i) although it is not a Citizen of the United States, it has entered into the Trust Agreement, pursuant to which it has transferred to the Owner Trustee by virtue of Section 6.13 thereof, to the extent set forth therein, the power to manage and control the ownership and operation of the Aircraft to ensure, as more fully set forth therein, that such ownership and operation of the Aircraft will be controlled by the Owner Trustee and that the Owner Participant shall have no power to influence or limit the exercise of the Owner Trustee's authority in respect thereof under Section 6.13 of the Trust Agreement; (ii) the Owner Participant agrees not to amend the provisions of Section 6.13 of the Trust Agreement; (iii) if the Owner Participant shall become a Citizen of the United States, its obligations not to amend Section 6.13 of the Trust Agreement shall cease, except that such Section 6.13 may not be terminated unless prior thereto the Lessee and, so long as the Indenture remains in effect, the Indenture Trustee receives an affidavit of citizenship from the Owner Participant; and (iv) if the Owner Participant fails with respect to its obligations above or in Section 6.13 of the Trust Agreement and, as a result of such failure, the Aircraft is subject to deregistration under the Transportation Code, the Owner Participant shall promptly at its own expense comply with any of clauses (x), (y) or (z) of the next sentence. If the Owner Participant shall, at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States and the Owner Participant has become a Citizen of the United States, (i) cease to be, or believe itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant represents and warrants on the date hereof and as of the Refunding Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware and it has full corporate power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of the Original Agreements to which it is party, this Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Refunding Date will be duly executed and delivered by the Owner Participant and constitute or on the Refunding Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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; (v) it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of the Original Agreements to which it is a party, this Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and if it shall at any time cease to be such a "U.S. Person", it shall furnish to each Certificate Holder an indemnity, in form and substance reasonably satisfactory to such Certificate Holder, for any withholding taxes imposed by any foreign government or taxing authority on any payment due under any of the Operative Agreements that may be imposed as a result of the Owner Participant's failure to be such a "U.S. Person", to the extent that such withholding taxes reduce the amount of any payment to the Indenture Trustee; and (x) the representations and warranties of the Owner Participant set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Refunding Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and each Certificate Holder from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and each Certificate Holder as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Refunding Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform the Original Agreements to which it is a party, this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of the Original Agreements to which it is a party, this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, and each of the Original Agreements to which it is a party does, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, and each of the Original Agreements to which it is a party does, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Original Agreements and the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; (vii) on the Refunding Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by the Lessee on the Delivery Date, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States; and (viii) the representations and warranties of the Owner Trustee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Refunding Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Refunding Date 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 and has the power and authority to enter into and perform its obligations under the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party and to authenticate the Certificates to be delivered on the Refunding Date; (ii) the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Refunding Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; (v) on the Refunding Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and each Ancillary Agreement; and (vi) the representations and warranties of the Indenture Trustee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Refunding Date. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release upon written notice from the Lessee to make such request. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be), provided, however, that neither the Lessor nor the Owner Participant shall be liable for any act or omission of the Indenture Trustee or the Pass Through Trustee or any other Person claiming through the Indenture Trustee or the Pass Through Trustee. Section 7.09. Original Loan Participant's and Pass Through Trustee's Representations and Warranties. (a) The Original Loan Participant represents and warrants that the representations and warranties made by it in Sections 7.01(a) and 7.06 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date). (b) The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date and as of the Refunding Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Indenture Trustee (in its individual or trust capacity) and the Subordination Agent (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens attributable to the Owner Trustee) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, then the Lessee shall so notify the Indenture Trustee (such notice to be given at least 30 and not more than 60 days prior to the effective date of such assumption), and each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture, this Agreement and the other Operative Agreements, except any obligations relating to the period prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Delivery Date with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Owner Participant in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement (A) Section 2.01, 2.03, 2.04, 3.03, 3.11 or 3.12, Article 4 or 5 or Section 6.02 or 6.06 of the Trust Agreement without the prior written consent of such party (which consent will not be unreasonably withheld), or (B) any other provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee (except in connection with the exercise of remedies pursuant to Article 17 of the Lease). If and so long as the Indenture shall not have been discharged the consent of the Indenture Trustee shall also be required prior to any termination or revocation of such trust and in addition, the Owner Trustee will, at the Lessee's expense, promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part or the Lessor's Estate, the Trust Indenture Estate, Rent, the Certificates or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements or the Original Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Original Loan Certificates, the Pass Through Certificates or the Certificates; (viii) the Original Loan Certificates, the Pass Through Certificates or the Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Trust Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.11 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) hereof shall not extend to any of the following: (i) With respect to an Indemnitee other than an Original Loan Participant, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements or the Original Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) With respect to an Original Loan Participant, Income Taxes except to the extent such Income Tax is imposed (including by way of increase) (A) as a result of the operation, registration, location, presence, basing or use of the Aircraft, Airframe any Engine or any Part thereof, in such jurisdiction (it being understood that (I) the incremental Income Taxes described in this clause (A) shall not include any U.S. Federal income taxes and (II) that to the extent such incremental Income Taxes give rise to any incremental current Tax benefit in another tax jurisdiction, that such incremental benefit shall offset and decrease the incremental Income Taxes determined under this clause (A)) or (B) solely as a result of the place of incorporation, principal office, corporate domicile or the activities of the Lessor, Owner Participant, the Owner Trustee, the Indenture Trustee, the Lessee or any sublessee in such jurisdiction (it being understood that to the extent that any Income Taxes described under this clause (B) give rise to any incremental current Tax benefit in another tax jurisdiction or another tax period, that such incremental Tax benefit shall offset and decrease the Income Taxes determined under this clause (B)); provided, however, that the provisions of this paragraph (b)(ii) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02 of this Agreement; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Original Loan Certificates in the case of an Original Loan Participant, the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as trustee under the Original Trust Agreement or the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as trustee under the Original Indenture or the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements or the Original Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or the Original Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Delivery Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed (in the case of a Loan Participant, immediately after giving effect to such succession, assignment or other transfer) and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) Any Taxes which have been included in the Purchase Price; (xi) Any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to a Loan Participant; (xii) Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian or similar nondiscretionary capacity), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) is a "plan sponsor", within the meaning of Section 3(16)(B) of ERISA; and (xiii) Taxes imposed on the Lessor in its individual capacity or on the Owner Participant by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant or any of their Affiliates for or on account of any amount required to be withheld from a payment in respect of a Certificate or a Pass Through Certificate, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any Taxes required to be withheld and any interest, penalties and additions to tax with respect thereto, along with any other costs (including attorneys' fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Lessee so elects, the Lessee shall control the conduct of any contest (a "Lessee-Controlled Contest") and shall determine the method of pursuing such contest; provided that the Lessee shall not be entitled to control the contest or determine the method of pursuing any contest unless (i) the contest does not involve Income Taxes, (ii) the contest involves only Taxes for which the Lessee is liable (and for which the Lessee shall have acknowledged its liability) and (iii) the Indemnitee reasonably determines that allowing the Lessee to control such contest could not have an adverse effect on such Indemnitee or its Affiliates. The Lessee shall consider in good faith any suggestion made by the Indemnitee concerning the conduct of a Lessee-Controlled Contest. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder and (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the making available by the Participants of their respective Commitments and the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or Owner Participant is the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of Lessee with respect to such Indemnitee, then such Indemnitee shall pay to Lessee within 30 days of Lessee's demand therefor an amount which equals the amount actually paid by Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements and the Original Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature, including without limitation Make-Whole Premium (unless excluded pursuant to Section 3.03 of the Lease) (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) the Original Agreements, this Agreement, the Lease, the Indenture, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Pass Through Agreement, the Bills of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements or the Original Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements or the Original Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the enforcement of the terms of the Operative Agreements or the Original Agreements and the administration of the Trust Indenture Estate; and (vi) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate or any Original Loan Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or the Original Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement or the Original Trust Agreement and the Lessor's Estate, the Indenture or the Original Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Original Participation Agreement, the Indenture, the Original Indenture, the Indenture and Security Agreement Supplement, the Trust Agreement or the Original Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement or the Original Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in or holding of any Lien on the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements and the Original Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) in respect of the Aircraft to the extent attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease (except provided that this exclusion shall not apply to the extent that the Lessee has assumed the Certificates pursuant to Section 7.11 hereof) or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease, the other Operative Agreements or the Original Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Engine Warranty Assignment, the Lease, the Indenture, the Trust Agreement, the Original Agreements or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) is, in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; in the case of SSB, Lessor's Liens to the extent attributable to SSB; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is, in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Delivery Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; and (ix) is, in the case of the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian or similar nondiscretionary capacity), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) is a "plan sponsor", within the meaning of Section 3(16)(B) of ERISA. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement, the Original Agreements and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments to such Indemnitee pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. The Lessee shall not enter into any settlement or compromise which admits any criminal violation, gross negligence or willful misconduct on the part of any Indemnitee without the prior written consent of such Indemnitee. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to such termination or expiration or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. The Owner Participant shall (as soon as practicable upon receipt of appropriate bills or invoices) furnish the Owner Trustee funds in an amount equal to the amount of the Transaction Costs for which the Owner Trustee is liable pursuant to this Section 10.01. The Owner Trustee shall pay (or reimburse the Lessee if the Lessee shall have previously made such payment), in addition to those items set forth in Section 10.01(a) of the Original Participation Agreement (other than clause (v) thereof) all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the Original Loan Participant and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the initial fees and expenses of the Owner Trustee, the Subordination Agent and the Indenture Trustee; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xi) reimbursement to the Owner Participant, the Owner Participant Guarantor, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Refunding Date of the instruments described in this Agreement, and the fees and expenses (including computer time-sharing charges) of First Chicago Leasing Corporation, financial advisor to the Lessee; (xiii) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; (xiv) out-of-pocket expenses of Cornerstone Financial Advisors Limited Partnership, the Owner Participant's economic advisor (including up to $10,000 of computer time-sharing costs); and (xv) any other amounts approved by the Lessee and the Owner Participant. Notwithstanding the foregoing, the fees and expenses described in clauses (ii) through (xv) of this paragraph shall be allocable to and payable by the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant or the refunding of the Original Loan Certificates, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant or the refunding of the Original Loan Certificates, only in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, EBO Price, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph and Section 10.01 of the Original Participation Agreement is 1.6506666667% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment (as such term is defined in the Original Participation Agreement), (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 of the Original Participation Agreement and (iii) the amount with respect to Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof, exceed $19,500,000. To the extent that the payment by the Owner Participant with respect to Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $19,500,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under the Original Agreements, this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Engine Warranty Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement (including any adjustment pursuant to Section 3.04 of the Lease) or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant after the Delivery Date of any interest in the Aircraft, the Lessor's Estate, the Beneficial Interest or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss, (C) in connection with the termination of the Lease or (D) as a result of an action or direction of the Lessee pursuant to Section 4.02 or Article 8, 9 or 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall not have any obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Indenture, the Trust Agreement and the Tax Indemnity Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Bills of Sale, the Trust Agreement, the Engine Warranty Assignment, any other Operative Agreement, any Original Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal, any Make-Whole Premium and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities and the Indenture and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of each of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Trust Agreement shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. No Retroactive Application. This Agreement, the Lease, the Indenture, the Ancillary Agreement I and the Trust Agreement each amend and restate, and the Tax Indemnity Agreement amends, the respective original agreements with no intention of retroactive application. The applicable original agreements have been restated for the convenience of the parties and such amendments and restatements, and such amendment in the case of the Tax Indemnity Agreement, are not intended to waive or modify the obligations of any party which accrued or were to have been performed on or prior to the Refunding Date under such unamended agreements (or, in the case of this Agreement, the effective date hereof) or to deprive any party of its rights and remedies in respect thereof. Section 13.04. Pass Through Trustee's and Subordination Agent's Acknowledgement. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Owner Participant, to it c/o Bank of Montreal, 115 South LaSalle Street, Chicago, IL 60603, Attention: BMO Leasing (U.S.), Inc., telephone (312) 750-3791, facsimile: (312) 658-4616; or to such other address as the Owner Participant may from time to time designate in writing to the Lessee and the Indenture Trustee; (d) If to the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee, Pass Through Trustee or the Subordination Agent, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D- 60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431- 2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING/REOPTIMIZATION Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings (including the refinancing contemplated by this Agreement on the Refunding Date) in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"). Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant and the Indenture Trustee shall have received at least 10 Business Days' prior written notice of the scheduled closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent and setting forth Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and Breakage Costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any Breakage Costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; (viii) In the event the Lessee shall not prohibit the purchase of the Refinancing loan certificates (or pass through certificates, if the placement is in the form of pass through certificates), by, or with the assets of, an employee benefit plan, as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or a plan or individual retirement account, which is subject to Section 4975(c) of the Code, (individually or collectively, an "ERISA Plan"), the Lessee will permit the placement of the Refinancing loan certificates or pass through certificates, as the case may be, with an ERISA Plan only if purchasers of the Refinancing loan certificates or holders of pass through certificate holders, as the case may be, provide a representation (which may be in the form of a deemed representation) regarding their source of funds used in acquiring the Refinancing loan certificates or pass through certificates, as the case may be, and, if such purchasers or holders represent that they are using funds of an ERISA Plan in acquiring the Refinancing loan certificates or pass through certificates, as the case may be, such purchasers further represent that (1) either they are relying on a prohibited transaction exemption from the U.S. Department of Labor with respect to their purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, and they provide representations regarding the satisfaction of the relevant conditions of such an exemption or (2) their purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. The reliance on any such exemption will not be conditional on the Owner Participant's representation concerning its party in interest or other status with respect to ERISA Plans. If the exemption referred to in this paragraph (viii) is not valid or applicable in any respect to the purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, or if the representation in this paragraph (viii) that such purchase and holding will not constitute a non-exempt prohibited transaction is not correct, whichever is applicable, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses resulting from any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the placement of the Refinancing loan certificates with, or the holding of the Refinancing loan certificates by, any ERISA Plan with respect to which the Owner Participant is a party in interest, within the meaning of Section 3(14) of ERISA, or a disqualified person, within the meaning of Section 4975 of the Code, provided, however, that if the Lessee shall fail to obtain the representations set forth in this paragraph (viii), such indemnity shall not be subject to the exceptions set forth under Sections 8.01(b)(xii) and 9.01(b)(ix) hereof; and (ix) The Lessee shall pay all costs and expenses (including legal fees) incurred in connection with any proposed or actually consummated Refinancing. Section 15.02. Reoptimization. (a) If a Change in Tax Rate occurs prior to the end of the Basic Term, then, subject to the terms and conditions of this Section 15.02 and Section 3.04 of the Lease, the Owner Participant may, upon 30 days' prior notice to the Lessee, the Indenture Trustee, the Owner Trustee and the Holders, jointly elect to modify the schedule of payments of principal of the certificates issued ("Refinancing Certificates") in connection with any Refinancing effected after the Refunding Date using private debt (not including debt issued pursuant to an exemption from registration under the Securities Act relying on Rule 144A promulgated thereunder but otherwise marketed in a manner substantially similar to securities registered under the Securities Act, and not including debt issued in connection with any offering of securities registered under the Securities Act) due on each remaining Rent Payment Date on or commencing on the Rent Payment Date next succeeding the date mutually agreed to by the Owner Participant, the Lessee and the Indenture Trustee on which the Owner Participant shall make such modification (the "Reoptimization Date"). Promptly after making such modification, the Owner Participant shall furnish each party hereto written notice of the amounts so recalculated. (b) Adjustments to Refinancing Certificates. On the Reoptimization Date, subject to the satisfaction on or before the Reoptimization Date of the conditions set forth in Section 15.02(c), the Owner Trustee will issue and deliver and the Indenture Trustee will authenticate, and each holder of a Refinancing Certificate will accept delivery of, a new Refinancing Certificate or Refinancing Certificates (in replacement of each Refinancing Certificate then held by such holder, which Refinancing Certificates shall be surrendered to the Indenture Trustee for cancellation) containing such changed principal installments (expressed as a percentage of the original principal amount of such Refinancing Certificate) as shall have been recalculated by the Owner Participant, but in the same principal amount as, and containing terms identical to, except as otherwise contemplated by Section 15.02(d) hereof, the Refinancing Certificates originally issued in connection with the Operative Agreements. (c) Conditions to the Obligations of the Holders of the Refinancing Certificates on the Reoptimization Date. The obligation of each holder of a Refinancing Certificate to accept delivery of a new Refinancing Certificate on the Reoptimization Date, and to surrender on such Reoptimization Date any Refinancing Certificate then held by it, is subject to the following conditions precedent having been satisfied on or before the Reoptimization Date: (i) the requirements of Section 15.02(d) hereof shall have been satisfied; (ii) the following documents, in form and substance satisfactory to such Holder, shall have been duly authorized, executed and delivered by the party or parties thereto and shall be in full force and effect: (A) if the payments of Basic Rent, Stipulated Loss Values and Termination Values with respect to the Term have been changed, an amendment to the Lease, dated the Reoptimization Date, (B) an amendment to the Indenture setting forth any changed repayment schedule to the Refinancing Certificates, dated the Reoptimization Date and duly filed (or in the process of being so duly filed) for recordation with the Aeronautics Authority and (C) replacement Refinancing Certificates; and (iii) in connection with any Reoptimization the Owner Participant shall pay or agree to pay all reasonable costs and expenses incurred by the Lessee, the Owner Trustee, the Indenture Trustee and each Holder of a Refinancing Certificate (including, without limitation, reasonable legal fees and expenses) in connection with any such reoptimization. (d) Payment Schedules. Except as otherwise provided in this Section 15.02 as long as the Refinancing Certificates remain outstanding, the payment schedules for the Refinancing Certificates shall not be modified. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. Owner for Federal Tax Purposes. It is hereby agreed between the Owner Participant and the Lessee (but the Lessee makes no representation to such effect) that for Federal income tax purposes the Owner Participant will be the owner of the Aircraft and the Lessee will be the lessee of the Aircraft. Section 17.02. [Reserved]. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to and executed by the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement other than the Original Loan Participant. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed) under the Trust Agreement, the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Subordination Agent and its successors and permitted assigns, including without limitation each Holder of a Certificate, and the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed). Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Participant or the Owner Trustee becomes, all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment or participation an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this _____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:_____________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER PARTICIPANT: BMO LEASING (U.S.), INC. By:_____________________________________ Name: Title: OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:_____________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:_____________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President ORIGINAL LOAN PARTICIPANT: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent and as Original Loan Participant By:__________________________________________ Name: Title: SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N590FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $30,775,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N590FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $12,122,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N590FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,736,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreements. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 27, 2020, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Chicago, Illinois, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N590FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing on or prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. May 27, 1998. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of May 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(ix) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. If an Event of Loss described in any of clauses (i) (A), (iii), (iv) or (v) above shall occur, Lessor may elect, within 30 days following the date upon which such Event of Loss is deemed to have occurred, to waive such Event of Loss and the consequences thereof. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. FSC. Global Capital Solutions Ltd., a Barbados corporation. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes or Expenses imposed against the Indenture Trustee which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of May 1, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity or the Owner Participant) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. McDonnell Douglas Corporation, a Maryland corporation. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than (i) a citizen or resident of the United States, as defined in Section 7701(a)(30) of the Code, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or therein, or (iii) any estate or trust that is subject to United States federal income taxation regardless of the source of its income. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on May 27, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136036. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136037. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on May 27, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessee and the Owner Participant as it was originally executed on May 27, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on May 27, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Bankmont Financial Corp., a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Article 5 of the Trust Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's (i) nominal after-tax yield and aggregate after-tax cash flow during the Basic Term and (ii) nominal after-tax yield and aggregate after-tax cash flow assumed to be realized through the date on which the option under Section 4.02(a)(F) of the Lease may be exercised, in each case, utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement thereof in accordance with the Lease, which may be removed therefrom. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Price. Has the meaning specified in Ancillary Agreement I. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 27, 2020 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, with respect to the Owner Participant, the president or any vice president with direct responsibility for the transactions contemplated by the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease under the heading "Stipulated Loss Value Date." Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after July 15, 2006 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2011 and January 15, 2014, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the fifth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. SCHEDULE III PERMITTED COUNTRY LIST Australia Luxembourg Austria Malaysia Belgium Mexico Brazil Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan Thailand United Kingdom EXHIBIT A(1)(a) [Letterhead of Federal Express] [Refunding Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(l)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the refinancing in full of the Original Loan Certificates evidencing the Original Loan Participants' participation in the payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Refunding Date and which were or shall have been accomplished on or prior to the Refunding Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the filing and, where appropriate, recording, pursuant to the Transportation Code of the Lease, the Indenture, the Trust Agreement, the filing of the financing statements referred to in Section 4.01(f) of the Participation Agreement and the taking of possession by the Indenture Trustee of the original counterpart of the Lease and maintaining possession of the original counterpart of the Lease Supplement delivered on the Delivery Date, no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the Delivery Date the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. Pursuant to the Original Participation Agreement the Aircraft was duly delivered to the Owner Trustee. Federal, as Lessee, duly accepted the Aircraft under the Original Lease and the Lease Supplement and the Term commenced on the Delivery Date. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. I rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. I hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b) [Letterhead of Davis Polk & Wardwell] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(l)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. Pursuant to the Original Participation Agreement, the Owner Participant and the Original Loan Participant participated in the payment of the Purchase Price of one McDonnell Douglas MD-11F Aircraft which was purchased by the Owner Trustee pursuant to the Bills of Sale, subjected to the Lien of the Original Indenture and leased to Federal Express under the Original Lease. The Participation Agreement provides, among other things, for the refinancing of the Original Loan Certificates using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. The Lease creates a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the Lease (with the Indenture attached as an exhibit), (B) the Indenture and (C) the Trust Agreement. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) that the Original Loan Certificate is delivered by the Original Loan Participant to the Indenture Trustee for cancellation and is cancelled, (vi) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vii) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Original Indenture created, and the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that they purport to create; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Participation Agreement, the Trust Agreement, the Indenture and the Lease by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statements referred to in Section 4.01(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. (e) We rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(2)(a) [Letterhead of Winston & Strawn] [Refunding Date] To Each of the Addressees Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for (i) BMO Leasing (U.S.), Inc., a Delaware corporation (the "Owner Participant"), in connection with the transactions contemplated by (a) the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee (the "Lessee"), the Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee (the "Owner Trustee") and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent, (b) the Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Trust Agreement"), by and between the Owner Participant and the Owner Trustee, (c) the Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended by Amendment No. 1 to the Tax Indemnity Agreement dated as of June 15, 1998 (the "Indemnity Agreement"), between the Owner Participants and the Lessee, and (d) Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, as amended and restated on the Refunding Date ("Ancillary Agreement I"), by and among the Lessee, the Owner Participant, the Owner Trustee, and the Indenture Trustee, and (ii) Bankmont Financial Corp., a Delaware banking association (the "Guarantor"), in connection with the transactions contemplated by the Owner Participant Guaranty, dated the Delivery Date, as amended and restated on the Refunding Date (the "Guaranty"), from the Guarantor to each of the beneficiaries named therein. This opinion letter is delivered pursuant to Section 4.01(l)(iii) of the Participation Agreement. Unless otherwise defined herein, all capitalized terms used herein shall have the respective defined meanings set forth in the Participation Agreement. In connection with our opinions herein, we have examined executed counterparts of the Participation Agreement, the Trust Agreement, the Indenture, the Indemnity Agreement, the Guaranty and Ancillary Agreement I (collectively, the "Documents"). We have further examined and relied upon the accuracy of original, certified, conformed, photographic or telecopied copies of such records, agreements, certificates and other documents as we have deemed necessary or appropriate to enable us to render the opinions expressed herein. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to us as certified, conformed, photographic or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, we have assumed the same to have been properly given and to be accurate. As to various questions of fact material to our opinions, we have relied solely upon the accuracy of the statements, representations and warranties made in the Documents, and we have made no independent investigation or inquiry with respect to such factual matters. With your consent, and for purposes of this opinion letter, we have assumed the accuracy of the following matters, but we have not made any independent investigation or inquiry with respect thereto and we render no opinion on such matters: (a) The Participation Agreement, the Indemnity Agreement, the Trust Agreement and Ancillary Agreement I at the time of execution and delivery by the Owner Participant will have been duly and validly executed and delivered by all parties thereto other than the Owner Participant and will constitute the legal, valid and binding obligations of such parties, enforceable against such parties in accordance with their terms, except as the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (b) The parties to the Participation Agreement, the Indemnity Agreement, the Trust Agreement and Ancillary Agreement I other than the Owner Participant, at the time of execution and delivery by the Owner Participant, have obtained, and there are in full force and effect at such time, any and all required consents, permits, and approvals required by or from any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity, binding effect or enforceability of the Participation Agreement, the Indemnity Agreement, the Trust Agreement and Ancillary Agreement I. We have been retained as special counsel to the Owner Participant and the Guarantor in connection with transactions contemplated by the Participation Agreement and the Guaranty and have not generally represented the Owner Participant or the Guarantor in their respective business activities and are not familiar with the nature and extent of such activities. Accordingly, we also have assumed without investigation that such other activities are not of such a nature as to cause the transactions contemplated by the Participation Agreement and the Guaranty to be governed by laws or regulations of the State of New York or the United States of America applicable only because of such activities (such as laws relating specifically to the banking, securities, insurance or utility industries) and not applicable to business corporations generally. Based upon the foregoing but subject to the assumptions, limitations and qualifications set forth herein, we are of the opinion that: 1. The Participation Agreement, the Indemnity Agreement and Ancillary Agreement I constitute legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and except as enforcement thereof is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). 2. The Guaranty constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditor's rights generally, and except as enforcement thereof is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). 3. Neither the execution and delivery of the Participation Agreement, the Trust Agreement, the Indemnity Agreement or Ancillary Agreement I by the Owner Participant nor the consummation by the Owner Participant of any of the transactions therein contemplated, or the fulfillment of, or compliance with, the terms and provisions of any thereof, (A) requires for its validity that the Owner Participant obtain the consent or approval of, give notice to, register with, or take any other action with respect to, any governmental authority or agency of the State of New York or the Federal government of the United States, or (B) contravenes any law, governmental rule or regulation of the State of New York or the Federal government of the United States or any governmental authority or agency thereof. 4. Neither the execution and delivery of the Guaranty by the Guarantor nor the consummation by the Guarantor of any of the transactions therein contemplated, or the fulfillment of, or compliance with, the terms and provisions thereof, (A) requires for its validity that the Guarantor obtain the consent or approval of, give notice to, register with, or take any other action with respect to, any governmental authority or agency of the Federal government of the United States, or (B) contravenes any law, governmental rule or regulation of the Federal government of the United States or any governmental authority or agency thereof. In rendering the foregoing opinions, we have relied, with your consent, on the opinion of even date herewith of Thomas Sizer, Esq., counsel for the Owner Participant and the Guarantor, as to the matters set forth therein and our opinions are subject to the same limitations and exceptions set forth therein. The foregoing opinions are subject, however, to the qualifications: (a) that we express no opinion as to matters relating to the title to or sufficiency of description of any property or collateral described in the Documents or the creation, perfection or relative priority of any lien or security interest intended to be created with respect to such property or collateral thereunder; (b) certain indemnification provisions contained in the Documents may be limited or rendered unenforceable by considerations of public policy; (c) certain requirements in the Documents specifying that provisions thereof may only be waived in writing may not be valid, binding or enforceable to the extent that an oral agreement or an implied agreement by trade practice of course of conduct has been created modifying any provision of such document; and (d) we express no opinion as to the severability of any provision of any Document. In addition, we express no opinion as to matters governed by (i) any tax laws, (ii) the Federal Aviation Act of 1958, as amended, or by any other laws, statutes, rules or regulations of the United States particularly relating to the acquisition, ownership, registration, leasing, use or sale of the Aircraft, the Airframe or the Engines other than such laws relating to personal property generally, (iii) any securities laws or (iv) laws pertaining to the Owner Participant or the Guarantor solely because of the business activities of such Owner Participant or the Guarantor, respectively, and which are not applicable to business corporations generally. We are licensed to practice law in the State of New York and we express no opinions herein as to the laws of any state or jurisdiction other than the laws of the State of New York and the laws of the United States of America. This opinion letter is furnished by us at your request and at the Owner Participant's and Guarantor's request for your sole benefit, and we agree that you may rely on the opinions expressed herein. No other person or entity shall be entitled to rely on the opinion expressed herein without our express prior written consent. This opinion letter is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein. This opinion letter is of the date hereof and we undertake no, and disclaim any, obligation to advise you of any changes in any matters set forth herein. We rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(2)(b) [Letterhead of BMO Leasing (U.S.), Inc.] [Refunding Date] To Each of the Persons Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: I have acted as counsel to (i) BMO Leasing (U.S.), Inc., a Delaware corporation (the "Owner Participant"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") among the Owner Participant, Federal Express Corporation, as Lessee, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee and First Security Bank, National Association, not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent; and (ii) Bankmont Financial Corp., a Delaware corporation (the "Guarantor"), in connection with the transactions contemplated by the Guaranty dated the Delivery Date, as amended and restated on the Refunding Date (the " Guaranty") made by the Guarantor in favor of the beneficiaries named therein. For the purposes of this opinion letter, all terms defined in the Participation Agreement, but not defined herein shall have the same meanings when used herein. In connection with the opinion letter, I have examined the Operative Agreements to which the Owner Participant and the Guarantor are parties, and I have examined originals, or copies certified or otherwise identified to my satisfaction, of such records, documents, certificates and other instruments as in my judgment are necessary or appropriate for purposes of this opinion letter. In such examination I have assumed the genuineness of all signatures (other than on behalf of the Owner Participant and the Guarantor) and the authenticity of all documents submitted to me as originals and the conformity with the originals of all documents submitted to me as copies. As to any facts material to my opinions expressed below, I have relied upon the representations and warranties contained in or made pursuant to the Operative Agreements to which the Owner Participant and the Guarantor are parties, and upon originals, or copies authenticated to my satisfaction, of such certificates of the Owner Participant and Guarantor, or public officials and such corporate records, documents and other instruments as in my judgment are necessary or appropriate to enable me to render the opinions expressed below. I have assumed, except with regard to the Owner Participant and the Guarantor, the Operative Agreements to which the Owner Participant is a party and the Guaranty have been duly authorized, executed and delivered by the parties thereto and that they constitute the legal, valid and binding obligations of each party thereto enforceable against each such party in accordance with their respective terms. Based upon the foregoing, I advise you that, in my opinion: 1. The Owner Participant is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has or had, on the date of execution thereof, the full corporate power and authority to execute, deliver and perform its obligations under the Operative Agreements to which it is a party. 2. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has or had, on the date of execution thereof, the full corporate power and authority to execute, deliver and perform its obligations under the Guaranty. 3. Each of the Operative Agreements to which the Owner Participant is a party and the Guaranty have been duly authorized, executed and delivered by the Owner Participant and the Guarantor, respectively. 4. Neither the execution and delivery by the Owner Participant of the Operative Agreements to which it is a party, nor the consummation by the Owner Participant of any of the transactions contemplated thereby (a) requires the consent or approval of, the giving of notice to, the registration with, the recording or filing of any document with, or the taking of any other action with respect to any governmental authority or agency of the State of Delaware or of the federal government of the United States; or (b) violates any law, governmental rule or regulation of the State of Delaware or of the federal government of the United States. 5. Neither the execution and delivery by the Guarantor of the Guaranty to which it is a party, nor the consummation by the Guarantor of any of the transactions contemplated thereby (a) requires the consent or approval of, the giving of notice to, the registration with, the recording or filing of any document with, or the taking of any other action with respect to any governmental authority or agency of the State of Delaware or of the federal government of the United States; or (b) violates any law, governmental rule or regulation of the State of Delaware or of the federal government of the United States. 6. Neither the execution and delivery by the Owner Participant of the Operative Agreements to which it is a party, nor the consummation by the Owner Participant of any of these transactions contemplated thereby, conflicts with, results in a breach of or violates any of the terms, conditions or provisions of (i) the Certificate of Incorporation or Bylaws of the Owner Participant, (ii) any order, writ, injunction or decree known to me after due internal inquiry, of any court or governmental authority against the Owner Participant or by which the Owner Participant or any of its properties is bound or (iii) any indenture, mortgage or contract or other material agreement or instrument known to me after due inquiry, to which the Owner Participant is a party or by which it or any of its properties is bound or constitutes a default thereunder or results in the imposition of any lien upon any of its properties. 7. Neither the execution and delivery by the Guarantor of the Guaranty, nor the consummation by the Guarantor of any of the transactions contemplated thereby, conflicts with, results in a breach of or violates any of the terms, conditions or provisions of (i) the Certificate of Incorporation or By-laws of the Guarantor, (ii) any order, writ, injunction or decree known to me after due internal inquiry, of any court or governmental authority against the Guarantor or by which the Guarantor or any of its properties is bound or (iii) any indenture, mortgage or contract or other material agreement or instrument known to me after due internal inquiry, to which the Guarantor is a party or by which it or any of its properties is bound or constitutes a default thereunder or results in the imposition of any lien upon any of its properties. 8. There are no actions, suits or proceedings pending or, to the best of my knowledge, threatened against or affecting the Owner Participant or the Guarantor before any court, administrative agency or other governmental body or arbitration board or tribunal which, if adversely determined, would materially and adversely affect the Owner Participant's ability to perform its obligations under the Operative Agreements to which the Owner Participant is a party or the Guarantor's ability to perform its obligations under the Guaranty. I am authorized to practice law in the State of Illinois and do not hold myself out as an expert on the law of any state other than the State of Illinois and the Delaware General Corporation Law. Consequently, the foregoing opinions are limited to the federal laws of the United States of America, the laws of the State of Illinois and the Delaware General Corporation Law, and I express no opinion as to the laws of any other state or jurisdiction. I express no opinion as to securities laws. This opinion letter is rendered to you pursuant to Section 4.01(l)(iii) of the Participation Agreement and is solely for your benefit in the transactions contemplated by the Participation Agreement. This opinion letter may not be relied upon by you for any other purpose, or relied upon by any other person for any purpose without my prior written consent. We rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3) [Letterhead of Ray, Quinney & Nebeker] [Refunding Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N590FE (the "Aircraft") is being refinanced. This opinion is furnished pursuant to Section 4.01(l)(iv) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Ancillary Agreement I; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Refunding Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Refunding Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. We rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(4) [Letterhead of Bingham Dana LLP] [Refunding Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 between State Street and BMO Leasing (U.S.), Inc., as Owner Participant ("Owner Participant") (the "Trust Agreement") and to State Street Bank and Trust Company (the "Parent Guarantor") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); State Street, in its individual capacity and Owner Trustee; the Owner Participant; First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent; and Morgan Guaranty Trust Company of New York, as Original Loan Participant. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee and the Parent Guarantor has requested that we deliver this opinion to you in accordance with Section 4.01(l)(v) of the Participation Agreement. Our representation of State Street and the Parent Guarantor has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and the Parent Guarantor and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency and the Massachusetts Commissioner of Banks relating to State Street and the Parent Guarantor, respectively, the Owner Trustee Parent Guarantee of the Parent Guarantor dated as of the date hereof (the "Guaranty") and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street, the Owner Trustee and the Parent Guarantor), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street, the Owner Trustee and the Parent Guarantor). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee, the Parent Guarantor or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee, the Parent Guarantor and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed in paragraphs 1 through 14 are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America and the opinions expressed in paragraphs 15 through 19 are limited solely to the laws of the Commonwealth of Massachusetts and the federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 11 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. On the Delivery Date, the Owner Trustee received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. 15. The Parent Guarantor is a Massachusetts trust company, duly organized, existing and in good standing with the Commissioner of Banks of the Commonwealth of Massachusetts under the laws of the Commonwealth of Massachusetts. 16. The Parent Guarantor has full corporate power and authority to enter into, deliver and perform its obligations under the Guaranty, and the Guaranty has been duly authorized, executed and delivered by the Parent Guarantor, is a legal, valid and binding obligation of the Parent Guarantor and is enforceable against the Parent Guarantor in accordance with its terms. 17. The execution and delivery of the Guaranty and compliance by the Parent Guarantor with all of the provisions thereof do not and will not contravene (a) any provisions of any requirement of law or of any rule or regulation or any judgement or order known to us of any court or governmental authority applicable to or binding on the Parent Guarantor or any of its properties, (b) any contractual obligations of the Parent Guarantor known to us, or (c) any of the provisions of its charter documents or by-laws. 18. No consent or authorization of, notice to, filing or registration with, or other act by or in respect of, any federal or Massachusetts governmental authority and, to our knowledge, no consent of any other person (including, without limitation, any stockholder or creditor of the Parent Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of the Guaranty against the Parent Guarantor. 19. To our knowledge, there are no proceedings pending or threatened against or affecting the Parent Guarantor in or before any court or by or before any governmental authority, administrative agency, arbitration board or tribunal which, individually or in the aggregate, if adversely determined, would materially adversely affect the ability of the Parent Guarantor to perform its obligations under the Guaranty. We rendered an opinion dated May 27, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5) [Letterhead of Ray, Quinney & Nebeker] [Refunding Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N590FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N590FE (the "Aircraft") is being refinanced. This opinion is furnished pursuant to Section 4.01(l)(vi) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Refunding Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Refunding Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(6)(b) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(7) [Letterhead of Daugherty, Fowler & Peregrin] [Refunding Date] To the Parties Named on Schedule A attached hereto Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.01(l)(viii) of the Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") among Federal Express Corporation, as lessee (the "Lessee"), BMO Leasing (U.S.), Inc., as owner participant (the "Owner Participant"), Morgan Guaranty Trust Company of New York, as original loan participant (the "Original Loan Participant"), State Street Bank and Trust Company of Connecticut, National Association, as owner trustee (the "Owner Trustee"), and First Security Bank, National Association, as indenture trustee, pass through trustee and subordination agent (the "Indenture Trustee"), which Participation Agreement amends and restates that certain Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998 (the "Original Participation Agreement") among the Lessee, the Owner Participant, the Original Loan Participant, the Owner Trustee and the Indenture Trustee, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement amends and restates the Original Trust Agreement, which Trust Agreement was filed at ____ _.m., C._.T.; (b) Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Indenture") between the Owner Trustee and the Indenture Trustee, which Indenture amends and restates the Original Indenture, which Indenture was filed at ____ _.m., C._.T.; and, (c) Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Lease") between the Owner Trustee, as lessor, and the Lessee, as lessee, which Lease amends and restates the Original Lease, with the Indenture attached thereto, which Lease with the Indenture attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. AC Form 8050-2 Aircraft Bill of Sale dated May 27, 1998 (the "FAA Bill of Sale") from the Lessee, as seller, conveying title to the Airframe to the Owner Trustee has been duly recorded by the FAA on __________________ and assigned Conveyance No. ______; 2. the Indenture and the Lease with the Indenture attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 3. the Trust Agreement is in due form for filing and has been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Original Trust Agreement was duly filed with the FAA on May 27, 1998 pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 5. the Original Indenture with the Indenture and Security Agreement Supplement attached has been duly filed with and duly recorded by the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 6. the Original Lease with the Lease Supplement, the Original Indenture and the Indenture and Security Agreement Supplement attached was duly filed with and duly recorded by the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 7. the Airframe is duly registered in the name of the Owner Trustee pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 8. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, and (ii) the rights of the parties under the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement; 9. the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 10. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement, the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, or the Original Trust Agreement, as amended and restated by the Trust Agreement, except for such filings as are referred to in our opinion dated May 27, 1998 (which have been duly effected) and the filings referred to in clauses (a), (b) and (c) above; and, 11. neither the authorization, issuance and delivery of the Certificates, the execution and delivery by the parties thereto of the Original Trust Agreement, the Trust Agreement, the Original Indenture, the Indenture, the Indenture and Security Agreement Supplement, the Original Participation Agreement, the Participation Agreement, the FAA Bill of Sale, the Original Lease, the Lease and the Lease Supplement or the performance by the parties thereto of: (i) the Original Trust Agreement, as amended and restated by the Trust Agreement; (ii) the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement; (iii) the Original Participation Agreement, as amended and restated by the Participation Agreement; and (iv) the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement, in accordance with the provisions thereof, nor the consummation by the parties thereto of any of the transactions contemplated thereby, requires the consent or approval of, or the giving of notice to, or the registration with, or the taking of any other action in respect of, the FAA except for the filings, the recordations and the filings for recordations specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under 29 U.S.C. Section 1368(a), possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel for the Aeronautical Center dated ____________, 1998 and have continued to rely upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated __________________, copies of which are attached hereto. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48505 and U.S. Registration No. N590FE (the "Airframe") and three (3) General Electric CF6-80C2-D1F aircraft engines bearing manufacturer's serial number 702-302, 702-315 and 702-819 (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Original Trust Agreement ------------------------ Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between BMO Leasing (U.S.), Inc., as owner participant, and State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, which was filed with the FAA on May 27, 1998. Original Indenture ------------------ Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, and First Security Bank, National Association, as indenture trustee, which together with the Indenture and Security Agreement Supplement (as hereinafter defined) attached thereto was recorded as one instrument by the FAA on ________________ and assigned Conveyance No. _______. Indenture and Security Agreement Supplement ------------------------------------------- Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, and First Security Bank, National Association, as indenture trustee, with respect to the Aircraft, which was attached to and recorded by the FAA as one instrument with the Original Indenture. Original Lease -------------- Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, as lessor, and Federal Express Corporation, as lessee, which together with the Lease Supplement (as hereinafter defined), the Original Indenture and the Indenture and Security Agreement Supplement attached thereto was recorded as one instrument by the FAA on ________________ and assigned Conveyance No. _______. Lease Supplement ---------------- Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE) dated May 27, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, as lessor, and Federal Express Corporation, as lessee, with respect to the Aircraft, which was attached to and recorded by the FAA as one instrument with the Original Lease. Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV), (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement I, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] - ------------------------------------------------------------------------------ PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48791, REGISTRATION NO. N620FE - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 3 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 18 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 27 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 28 Section 6.02. Offering by Lessee....................................... 34 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 42 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 43 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 44 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 47 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 55 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 63 Section 8.05. Refunds.................................................. 65 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 72 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 73 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 78 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 79 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 80 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 83 Section 17.03. Counterparts............................................ 85 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee................................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms SCHEDULE VII Assumed Aircraft Value EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Manufacturer's Counsel EXHIBIT A(7) Opinion of Engine Manufacturer's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from the Lessee; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; and (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the Purchase Agreement to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and an Engine Consent and Agreement executed by the Engine Manufacturer, said Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement to be substantially in the form of Exhibit E hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Consent and Agreement and the Bills of Sale, the Owner Trustee will purchase, and receive title to, the Aircraft from the Lessee and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by the Lessee to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be a McDonnell Douglas MD-11F airframe having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) the Lessee shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the transfer by the Initial Owner Participant to the Owner Participant of its Beneficial Interest and the transfer of title to the Aircraft from the Lessee to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price, or such lesser amount referred to in the proviso to this Section 3.02(a), and (B) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from the Lessee, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Trust Agreement; (iv) the Intercreditor Agreement; (v) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (vi) the Collateral Agreement; and (vii) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Bills of Sale; (xi) the Purchase Agreement; (xii) the Purchase Agreement Assignment; (xiii) the Consent and Agreement and the Engine Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) counsel for the Engine Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of the FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include the Bills of Sale; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of the FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of the FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement and the Engine Consent and Agreement which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of the FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by the Lessee to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement or the Purchase Agreement Assignment and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, the FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, the FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by the Lessee, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Bills of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement or the Purchase Agreement Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4442105263% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, the Bills of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than March 15, 1999, or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N620FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,086,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N620FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,157,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N620FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $16,757,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N620FE and Manufacturer's serial number 48791, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N620FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N620FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. June 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N620FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $76,000,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Schedule VII hereto) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease - ----- Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement - ----------------------- The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. SCHEDULE VII ASSUMED AIRCRAFT VALUE Assumed Aircraft Value (in millions) ---------------------- $107,715,000 EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N620FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N620FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of McDonnell Douglas Corporation] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- You have requested that McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer") furnish you an opinion in connection with Section 4.02(d) of the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, with respect to a McDonnell Douglas Model MD-11F aircraft bearing Federal Aviation Administration registration number N620FE and Manufacturer's serial number 48791 (including the engines installed thereon but excluding equipment furnished by the Lessee therefor, the "Aircraft"). In this regard, the Office of the General Counsel for Douglas Aircraft Company, a division of the Manufacturer has examined and is familiar with the Manufacturer's Articles of Incorporation and Bylaws, as amended, including provisions thereof with respect to the Boards of Directors. In addition, we have examined, among other things (1) Purchase Agreement No. A00431B dated as of March 17, 1998 between the Lessee and the Manufacturer, (2) the Manufacturer's Consent and Agreement to the Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 between the Lessee and the Owner Trustee and (3) the Manufacturer's Warranty Bill of Sale and FAA Bill of Sale conveying title to the Aircraft to the Lessee (such documents executed by the Manufacturer are hereby collectively referred to as the "Manufacturer Documents"). Based upon the foregoing and upon statements of appropriate Manufacturer employees as to factual matters and upon examination of the law as it deems necessary for the purposes of this Opinion, this Office is of the following opinion: 1. The Manufacturer is a corporation duly incorporated and validly existing in good standing under the laws of the State of Maryland, and is duly qualified and authorized to do business as a foreign corporation in, among other jurisdictions, the state of California. 2. The Manufacturer has the full corporate power, authority, and legal right to execute, deliver and perform under the Manufacturer Documents and the execution, delivery and performance by the Manufacturer of its obligations under the Manufacturer Documents have been duly authorized by all necessary corporate action on the part of the Manufacturer. 3. The Manufacturer Documents have been duly executed and delivered by, and, on the assumption that they have been duly executed and delivered by all other parties thereto, constitute the legal, valid and binding obligations of, the Manufacturer, enforceable in accordance with the respective terms thereof, do not require any stockholder approval, do not, to the best of our knowledge, require any approval or consent of any trustee or holder of any indebtedness or obligations of the Manufacturer, and do not contravene the Certificate of Incorporation or by-laws of the Manufacturer, or any indenture, mortgage, contract, instrument, or other agreement, in each case known to us, to which the Manufacturer is a party or by which it or any of its properties is bound. 4. Good title to the Aircraft was at the time of delivery by the Manufacturer to the Lessee vested in the Manufacturer, free and clear of all liens, claims, encumbrances, security interests, and rights of others; and assuming the filing for recordation of the FAA Bill of Sale in accordance with the provisions of the Federal Aviation Act of 1958, as amended, good title to the Aircraft was on such date duly conveyed by the Manufacturer to the Lessee, free and clear of all liens, claims, encumbrances, security interests, and rights of others. 5. Each of the FAA Bill of Sale and the Warranty Bill of Sale covering the Aircraft constituted an effective instrument for the conveyance of good title to the Aircraft to the Lessee, given the filing for recordation of the FAA Bill of Sale for the Aircraft in accordance with the provisions of the Federal Aviation Act of 1958 as amended. 6. The Aircraft was duly delivered by the Manufacturer to the Lessee and (as evidenced by the Lessee's execution of a receipt for the Aircraft) duly accepted by the Lessee pursuant to the Purchase Agreement. For purposes of this opinion, I have assumed that the Lessee had the power and authority to accept title to and delivery of the Aircraft on the date of delivery and that the representative acting on behalf of the Lessee was duly authorized to accept title to and delivery of the Aircraft on the Lessee's behalf. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law). No opinion is expressed as to laws other than the corporate law of the State of Maryland, the laws of the State of California and the Federal laws of the United States of America. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Pratt & Whitney] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent) and (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor. I am an attorney employed by Pratt & Whitney (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Engine Consent and Agreement (the "Consent"). The Consent covers three Pratt & Whitney 4462 series engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. _______, dated as of _____________ between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Participation Agreement and the Purchase Agreement Assignment. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement and the Purchase Agreement Assignment. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement and the Purchase Agreement Assignment have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement and the Purchase Agreement Assignment have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement and the Consent. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement and the Consent was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement and the Consent has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of __________ and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N620FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from the Lessee, as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N620FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N620FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions Airframe, Engines and Aircraft One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48791 and U.S. Registration No. N620FE (the "Airframe") and three (3) Pratt & Whitney 4462 aircraft engines bearing manufacturer's serial numbers ___-___, ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement II, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) dated as of June 15, 1998 (the "Purchase Agreement Assignment"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Seller"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Buyer"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Section 1 below; WHEREAS, the Buyer wishes to purchase the Aircraft, and the Seller, on the terms and conditions hereinafter set forth, is willing to sell and transfer title to the Aircraft to the Buyer; WHEREAS, the Buyer and the Seller are entering into the Lease pursuant to which the Aircraft will be leased by the Buyer to the Seller; and WHEREAS, the Seller, on the terms and conditions herein and in the Consent and Agreement of the Manufacturer and in the Engine Consent and Agreement of the Engine Manufacturer attached hereto, desires to assign to the Buyer certain of the Seller's rights and interests in and under the Purchase Agreement and the GTA relating to the Aircraft, and the Buyer desires to accept such assignment, as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties hereto agree as follows: Section 1. Definitions. For all purposes of this Purchase Agreement Assignment, except as otherwise expressly provided for or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the McDonnell Douglas MD-11F aircraft bearing United States Registration Number N620FE and Manufacturer's Serial Number 48791, which was delivered under the Purchase Agreement, including the Engines. "Engine Manufacturer" shall mean Pratt & Whitney, a Connecticut corporation. "Engines" shall mean the three (3) Pratt & Whitney 4462 turbofan jet engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. "Engine Warranties" shall mean the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty, and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of the GTA. "GTA" shall mean the General Terms Agreement dated as of ________________ between the Engine Manufacturer and the Seller but shall be limited to applicable engine warranties, as well as all of the terms and conditions, including the limitations, applicable hereto, as such provisions are assignable by the terms of this Agreement. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Buyer and the Seller, as the same may be amended, modified and supplemented, providing for the lease of the Aircraft. "Manufacturer" shall mean McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company, and its successors and assigns. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, by and among the Buyer, the Initial Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Seller, as the same may be amended, modified or supplemented. "Purchase Agreement" shall mean the Purchase Agreement A00431-B between the Seller and the Manufacturer, dated as of March 17, 1998, and as thereafter originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the foregoing relates to the Aircraft. "Purchase Price" shall mean the amount stated in Ancillary Agreement I. All other capitalized terms used herein and not otherwise defined shall have the meaning assigned to such term in the Lease. Section 2. Representation. The Seller does hereby represent and warrant that (a) it has furnished to the Buyer a true and complete copy of the Purchase Agreement and GTA as they relate to all of the Manufacturer's warranties and Engine Manufacturer's applicable warranties, as well as related obligations and rights in the Purchase Agreement and GTA, respectively, as assigned to the Buyer hereunder and (b) the Purchase Agreement and GTA are in full force and effect and the Seller is not in default thereunder. The Seller does hereby further represent and warrant that, to its knowledge, the Seller has, with the authorized execution of the Consent and Agreement and the Engine Consent and Agreement attached hereto, received all necessary consents to the assignment and transfer contemplated herein and that such consents are in full force and effect. The Seller does hereby further represent and warrant that the Seller has not assigned or pledged, and hereby covenants that it shall not assign or pledge, so long as this Purchase Agreement Assignment shall remain in effect, the whole or any part of the rights hereby assigned or any of its rights in respect of the Aircraft to anyone other than the Buyer. The Seller further represents and warrants for the benefit of the Buyer and the Owner Participant and their respective successors and assigns, as of the Delivery Date, that it is the lawful owner of the Aircraft; and, as of the Delivery Date that its title to the Aircraft is free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement covering the Aircraft, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease, and that, on the Delivery Date, the Buyer will receive good and marketable title to the Aircraft free and clear of all Liens other than rights of the Lessee under the Lease and the Lease Supplement, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease. Section 3. Assignment; Rights Reserved. Subject to the provisions of Section 5(a) hereof, the Seller does hereby sell, assign, transfer and set over unto the Buyer, except to the extent reserved below, all of the Seller's right, title and interest in the Purchase Agreement and the GTA pursuant to which the Seller acquired the Aircraft from the Manufacturer and Engine Manufacturer, as and to the extent that the same relate to the Aircraft and the purchase and operation thereof, including, without limitation, (a) all claims for damages in respect of the Aircraft arising as a result of any default by the Manufacturer under the Purchase Agreement or by the Engine Manufacturer under the GTA or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy, aircraft performance guarantee and indemnity provisions contained in the Purchase Agreement and the GTA and all claims thereunder, (b) any and all rights of the Seller to compel performance of the terms of the Purchase Agreement and the GTA in respect of the Aircraft and (c) any and all rights of the Seller under the Manufacturer's warranty bill of sale dated __________________ covering the Aircraft, the original of which is to delivered to the Indenture Trustee on the Delivery Date; reserving to the Seller, however, (i) all of the Seller's right, title and interest in and to the Purchase Agreement and the GTA as and to the extent that it relates to any matters other than in respect of the Aircraft, and (ii) with respect to the Aircraft so long, and only so long, as the Manufacturer and the Engine Manufacturer shall not have received notice from the Buyer as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all of the Seller's rights and interests in or arising out of any payments or deposits made relating to the Aircraft or to be made by the Seller or amounts credited or to be credited or paid or to be paid by the Manufacturer or Engine Manufacturer to the Seller in respect of the Aircraft and (iii) with respect to the Aircraft so long, and only so long, (x) as the Lease is in effect and (y) as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and Engine Manufacturer are obligated to provide or do provide pursuant to the Purchase Agreement and GTA with respect to the Aircraft. Section 4. Acceptance of Assignment. The Buyer hereby accepts the assignment contained in Section 3 hereof. Section 5. Rights of the Seller in Absence of Default. (a) Notwithstanding the foregoing, if and so long as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, (i) the Buyer authorizes the Seller during the Term on behalf of but to the exclusion of the Buyer, to exercise in Seller's own name (A) such rights and powers of the "Buyer" under the Purchase Agreement and GTA and (B) such rights as the Buyer may have with respect to the Aircraft under any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor with respect thereto and, subject to Section 5(c) hereof, to retain any recovery or benefit resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor in respect of the Aircraft, except that the Seller may not enter into any change order or other amendment, modification or supplement without the Buyer's prior written consent if such change order, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement as to the Aircraft or GTA as to the Engines or would otherwise materially adversely affect the Buyer's rights in the Aircraft or Engines, and (ii) the Buyer shall, at the Seller's expense, cooperate with the Seller and take such actions as the Seller reasonably deems necessary to enable the Seller to enforce such rights and claims. (b) Effective upon the receipt by the Manufacturer and Engine Manufacturer of written notice from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing and thereafter until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default have been cured or waived, (i) unless the Buyer in its sole discretion shall notify the Manufacturer and Engine Manufacturer to the contrary, the authorization given to the Seller under Section 5(a) hereof to enforce such rights and claims shall thenceforth cease to be effective and the Buyer and its successors and assigns shall, to the exclusion of the Seller, be entitled to assert and enforce such rights and claims as substitute party plaintiff or otherwise, and the Seller shall, at the request of the Buyer or its successors or assigns and at the Seller's expense, cooperate with and take such action as is reasonably necessary to enable the Buyer and its successors and assigns to enforce such rights and claims, and (ii) the Seller will be deemed to have constituted Buyer, its successors and permitted assigns, the Seller's true and lawful attorney, irrevocably (it being acknowledged that such appointment is coupled with an interest, namely the Buyer's rights acquired and to be acquired hereunder) with full power (in the name of the Seller or otherwise) to ask, require, demand, receive, compromise, settle, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement in respect of the Aircraft or the GTA in respect of the Engines, to the extent that the same have been assigned by this Purchase Agreement Assignment, and for such period as the Buyer may exercise rights with respect thereto under this clause (ii), to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith that the Buyer may deem to be necessary or advisable in the premises. (c) Notwithstanding this Purchase Agreement Assignment and anything contained herein to the contrary, all amounts that the Manufacturer or Engine Manufacturer are obligated to pay to the Seller under the Purchase Agreement and GTA with respect to the Aircraft or Engines, respectively, including, without limitation, in respect of refunds thereunder or resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement thereunder or the enforcement or exercise of any right or power under the Purchase Agreement (a "Manufacturer Payment") or under the GTA (an "Engine Manufacturer Payment") (excluding, however, from the Manufacturer Payments and Engine Manufacturer Payments any amounts the Manufacturer or Engine Manufacturer are obligated to pay to the Seller with respect to the rights reserved to the Seller in clauses (i) through (iii) of Section 3(b) hereof), will be payable and applicable as follows: all the Manufacturer Payments and Engine Manufacturer Payments shall be paid to the Seller unless and until the Manufacturer and Engine Manufacturer shall have received written notice as set forth in Section 5(d) from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer and Engine Manufacturer will, until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default under the Lease have been cured or waived, make any and all such payments directly to the Buyer. Any amounts received by the Buyer pursuant to the immediately preceding sentence shall, to the extent not theretofore applied in satisfaction of sums owing to the Buyer in accordance with the terms of the Lease, be returned to the Seller promptly after all Defaults or Events of Default under the Lease have been cured or waived. (d) For all purposes of this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer shall not be deemed to have knowledge of a declaration of an Event of Default or Default under the Lease or of the discontinuance or waiver of an Event of Default or Default unless and until the Manufacturer and Engine Manufacturer shall have received written notice thereof from the Owner Trustee addressed, in case of the Manufacturer, to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, and in the case of the Engine Manufacturer, to _________________________________________. When acting in accordance with the terms and conditions of the Purchase Agreement, the GTA and this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer may rely conclusively upon any such notice. Section 6. Certain Rights and Obligations of the Parties. (a) Anything herein contained to the contrary notwithstanding, (i) the Seller shall at all times remain liable to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft to perform all of its duties and obligations of "Buyer" thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (ii) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations, and (iii) except as provided in Section 6(b) hereof, neither the Buyer, the Indenture Trustee nor the Loan Certificate Holders shall have any obligation or liability under the Purchase Agreement or GTA by reason of, or arising out of, this Purchase Agreement Assignment or be obligated to perform any of the obligations or duties of the Seller under the Purchase Agreement or GTA or to make any payment or make any inquiry as to the sufficiency of any payment received by it or to present or to file any claim or to take any other action to collect or enforce any claim for any payment assigned thereunder. Notwithstanding anything in this Purchase Agreement Assignment or the attached Engine Consent and Agreement to the contrary, the Buyer and the Seller confirm expressly for the benefit of the Engine Manufacturer that: (i) The Buyer agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Seller incident to effecting the assignment herein; provided, however, that (1) the Buyer may use, retain and disclose such information to its special counsel and public accountants, who shall not further disclose such terms, (2) the Buyer may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to the Seller and to the Engine Manufacturer, and the Buyer shall afford the Seller and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, and (3) the Buyer may disclose such information to any bona fide potential purchaser of the Aircraft and/or the Engines (subject to execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). (ii) Without in any way releasing the Seller from any of its duties or obligations under the GTA, the Buyer agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (iii) It is expressly agreed that: (1) the Seller shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of the Seller thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (2) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations. (iv) Nothing contained in this Purchase Agreement Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. No further assignment of any remaining Engine Warranties, including but not limited to assignments for security purposes, are permitted without the express written consent of the Engine Manufacturer. (v) The Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of the Seller or the Buyer, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof. Such notice should be sent to: ______________________________________________. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of the Seller and the Buyer. So long as the Engine Manufacturer acts in good faith in accordance with this Purchase Agreement Assignment, the Engine Manufacturer may rely conclusively on any such notice without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. (b) Without in any way releasing the Seller from any of its duties or obligations under the Purchase Agreement or GTA, the Buyer confirms for the benefit of the Manufacturer and Engine Manufacturer that, insofar as the provisions of the Purchase Agreement and GTA relate to the Aircraft, each of (i) in exercising any rights under the Purchase Agreement or GTA, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement or GTA, the Purchase Agreement and GTA disclosed to the Buyer in writing and (ii) the provisions of the article of the Purchase Agreement entitled Assignment and Transfer regarding future assignment and transfer of rights under the Purchase Agreement, shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (c) Nothing contained herein shall (i) subject the Manufacturer or Engine Manufacturer to any liability to which it would not otherwise be subject under the Purchase Agreement or GTA or (ii) modify in any respect the Manufacturer's or Engine Manufacturer's contract rights thereunder, except as provided in the Consent and Agreement and Engine Consent and Agreement attached hereto. (d) The parties hereto, the Manufacturer by its execution and delivery of the Consent and Agreement and the Engine Manufacturer by its execution of the Engine Consent and Agreement, agree that all of the statements, representations, covenants and agreements made by the Buyer as Owner Trustee (when made in such capacity) contained in this Purchase Agreement Assignment and any agreement referred to herein or in the Participation Agreement other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Lessor's Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Lessor's Estate. Therefore, anything contained in this Purchase Agreement Assignment or such other agreements to the contrary notwithstanding (except for any express provisions that the Buyer is responsible for in its individual capacity), no recourse shall be had with respect to this Purchase Agreement Assignment or such other agreements against the Buyer in its individual capacity (or against any institution or person which becomes a successor trustee or co-trustee), the Owner Participant, or any officer, director, trustee, servant or direct or indirect parent or controlling person or persons of any of them; provided, however, that this Section 6(d) shall not be construed to prohibit any action or proceeding against the Owner Trustee in its individual capacity for its own willful misconduct or grossly negligent conduct; and provided, further, that nothing contained in this Section 6(d) shall be construed to limit the exercise and enforcement in accordance with the terms of this Purchase Agreement Assignment or such other agreements of rights and remedies against the Lessor's Estate. The foregoing provisions of this Section 6(d) shall survive the termination of this Purchase Agreement Assignment and the other Operative Agreements. (e) Nothing contained herein shall in any way diminish or limit the provisions of the Seller's indemnities in Article 9 of the Participation Agreement with respect to any liability of the Buyer, or any party to the Participation Agreement, to the Manufacturer in anyway relating to or arising out of the Purchase Agreement. Section 7. Further Assurances. The Seller agrees that at any time and from time to time the Seller shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Buyer may reasonably request in writing in order to obtain the full benefits of this Purchase Agreement Assignment and of the rights and powers herein granted. Section 8. No Amendment of Purchase Agreement and GTA. The Buyer agrees that it will not enter into any amendment, modification, supplement, rescission, cancellation or termination of the Purchase Agreement or GTA without the prior written consent of the Seller unless the Buyer shall have notified the Manufacturer and Engine Manufacturer as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, in which event any such amendment, modification, supplement, rescission, cancellation or termination shall relate solely to the rights assigned hereunder. Section 9. Binding Effect. This Purchase Agreement Assignment shall be binding upon and shall inure to the benefit of the Seller, the Buyer and their respective successors and permitted assigns. Section 10. Notice. Except as otherwise expressly provided herein, notice hereunder may be given, and shall be deemed to have been received, as provided in Section 25.01 of the Lease. Section 11. Simultaneous Execution. This Purchase Agreement Assignment is executed by the Buyer and the Seller concurrently with the execution and delivery of the Lease, the Participation Agreement and the Trust Agreement. Section 12. Grant of Security Interest. By the Indenture, the Buyer has granted to the Indenture Trustee, for the benefit of the Loan Certificate Holders, a security interest in all estate, right, title and interest of the Buyer in and to the Purchase Agreement, the GTA and this Purchase Agreement Assignment. Section 13. Counterparts. This Purchase Agreement Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 14. GOVERNING LAW. THIS PURCHASE AGREEMENT ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PROVISIONS), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION, Seller By: _______________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee, Buyer By: _______________________________________ Name: Title: CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) The undersigned, MCDONNELL DOUGLAS CORPORATION, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assignor") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Manufacturer under the Purchase Agreement with respect to the Aircraft to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Buyer" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement and future assignment or transfer of the Aircraft to a third party, the terms and conditions of the Purchase Agreement relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Manufacturer consents to the lease of the Aircraft by the Assignee to the Assignor under the Lease and agrees that the Purchase Agreement Assignment constitutes an agreement by the Assignee thereunder as required by Article 13 of the Purchase Agreement; (iv) the Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Aircraft under the Purchase Agreement unless and until the Manufacturer shall have received written notice from the Assignee addressed to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Aircraft under the Purchase Agreement (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Manufacturer agrees that it will not assert any liability claim against the Aircraft or any part thereof arising with respect to or in connection with any work performed by the Manufacturer or at its direction on the Aircraft on or prior to the date the Manufacturer conveys title to the Assignor. The Manufacturer hereby represents and warrants that: (i) it is a corporation duly organized and existing in good standing under the laws of the State of Maryland, (ii) the making and performance of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Manufacturer, do not require any stockholder or other approval, and do not contravene the Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which Manufacturer is a party or by which it is bound, and (iii) the making of the Purchase Agreement and this Consent and Agreement does not contravene, and to the best of the Manufacturer's knowledge, the Manufacturer's performance of the Purchase Agreement and this Consent and Agreement, does not contravene any law binding on the Manufacturer; and (iv) the Purchase Agreement constituted as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement has continued to constitute a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its terms and this Consent and Agreement constitutes a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its respective terms. The Manufacturer further represents and warrants that it has received payment in full with respect to the Aircraft. It is understood that this Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Manufacturer hereby represents and warrants that: 1. The Aircraft was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At time of delivery of the Aircraft to the Lessee, less than 50% of the fair market value of the Aircraft was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 McDONNELL DOUGLAS CORPORATION By: _______________________________________ Name: Title: ENGINE CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N611FE) Subject to the understanding that nothing contained in this Consent and Agreement or any other document pertaining thereto shall subject it to any liability or duplication of obligations to which it would not otherwise be subject under General Terms Agreement No. _______ dated as of ________________ (the "Engine Agreement") between it and Federal Express Corporation (the "Grantor") or modify in any respect its contract right thereunder, the undersigned, PRATT & WHITNEY, a Connecticut corporation (the "Engine Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assigner") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Engine Manufacturer under the GTA with respect to the Engines to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Airline" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the GTA, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Engine Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the GTA or in making any claim with respect to the Engines or other goods and services delivered or to be delivered pursuant to the GTA and future assignment or transfer of the Engines to a third party, the terms and conditions of the GTA relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Engine Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Engine Manufacturer consents to the lease of the Engines by the Assignee to the Assignor under the Lease; (iv) the Engine Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Engines under the GTA unless and until the Engine Manufacturer shall have received written notice from the Owner Trustee addressed to _________________________, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Engine Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Engines under the GTA (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Engine Manufacturer agrees that it will not assert any liability claim against the Engines arising with respect to or work performed by the Engine Manufacturer or at its direction on the Engines on or prior to the date the Manufacturer transferred title to the Assignor. The Engine Manufacturer hereby represents and warrants that: (i) the manufacturer is a corporation duly organized and existing in good standing under the laws of the State of New York; (ii) the making and performance of the GTA and this Engine Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any stockholder or other approval, and do not contravene the Engine Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound; (iii) the making of the GTA and this Engine Consent and Agreement does not contravene, and to the best of the Engines Manufacturer's knowledge, the Engine Manufacturer's performance of the GTA and this Engine Consent and Agreement, does not contravene any law binding on the Engine Manufacturer; (iv) the GTA constituted as of the date thereof and at all times thereafter to and including the date of this Engine Consent and Agreement has continued to constitute a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms and this Engine Consent and Agreement constitutes a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its respective terms and (v) it has received payment in full with respect to the Engines. It is understood that this Engine Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Engine Manufacturer hereby further represents and warrants that: 1. Each Engine was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At the time of delivery of each Engine to Lessee, less than 50% of the fair market value of the Engine was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 PRATT & WHITNEY By: _______________________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48792, REGISTRATION NO. N621FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 3 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 18 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 27 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 28 Section 6.02. Offering by Lessee....................................... 34 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 42 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 43 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 44 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 47 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 55 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 63 Section 8.05. Refunds.................................................. 65 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 72 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 73 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 78 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 79 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 80 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 83 Section 17.03. Counterparts............................................ 85 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee............................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms SCHEDULE VII Assumed Aircraft Value EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Manufacturer's Counsel EXHIBIT A(7) Opinion of Engine Manufacturer's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from the Lessee; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; and (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the Purchase Agreement to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and an Engine Consent and Agreement executed by the Engine Manufacturer, said Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement to be substantially in the form of Exhibit E hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Consent and Agreement and the Bills of Sale, the Owner Trustee will purchase, and receive title to, the Aircraft from the Lessee and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by the Lessee to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be a McDonnell Douglas MD-11F airframe having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) the Lessee shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the transfer by the Initial Owner Participant to the Owner Participant of its Beneficial Interest and the transfer of title to the Aircraft from the Lessee to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price, or such lesser amount referred to in the proviso to this Section 3.02(a), and (B) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from the Lessee, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Trust Agreement; (iv) the Intercreditor Agreement; (v) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (vi) the Collateral Agreement; and (vii) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Bills of Sale; (xi) the Purchase Agreement; (xii) the Purchase Agreement Assignment; (xiii) the Consent and Agreement and the Engine Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) counsel for the Engine Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of the FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include the Bills of Sale; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of the FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of the FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement and the Engine Consent and Agreement which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of the FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by the Lessee to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement or the Purchase Agreement Assignment and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, the FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, the FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by the Lessee, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Bills of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement or the Purchase Agreement Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4385416667% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, the Bills of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than March 15, 1999, or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N621FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,372,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N621FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,264,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N621FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $17,164,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N621FE and Manufacturer's serial number 48792, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N621FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N621FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N621FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2015 or January 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $76,800,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Schedule VII hereto) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. SCHEDULE VII ASSUMED AIRCRAFT VALUE Assumed Aircraft Value (in millions) ---------------------------------- $108,430,000 EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N621FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N621FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of McDonnell Douglas Corporation] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- You have requested that McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer") furnish you an opinion in connection with Section 4.02(d) of the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, with respect to a McDonnell Douglas Model MD-11F aircraft bearing Federal Aviation Administration registration number N621FE and Manufacturer's serial number 48792 (including the engines installed thereon but excluding equipment furnished by the Lessee therefor, the "Aircraft"). In this regard, the Office of the General Counsel for Douglas Aircraft Company, a division of the Manufacturer has examined and is familiar with the Manufacturer's Articles of Incorporation and Bylaws, as amended, including provisions thereof with respect to the Boards of Directors. In addition, we have examined, among other things (1) Purchase Agreement No. A00431B dated as of March 17, 1998 between the Lessee and the Manufacturer, (2) the Manufacturer's Consent and Agreement to the Purchase Agreement Assignment (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 between the Lessee and the Owner Trustee and (3) the Manufacturer's Warranty Bill of Sale and FAA Bill of Sale conveying title to the Aircraft to the Lessee (such documents executed by the Manufacturer are hereby collectively referred to as the "Manufacturer Documents"). Based upon the foregoing and upon statements of appropriate Manufacturer employees as to factual matters and upon examination of the law as it deems necessary for the purposes of this Opinion, this Office is of the following opinion: 1. The Manufacturer is a corporation duly incorporated and validly existing in good standing under the laws of the State of Maryland, and is duly qualified and authorized to do business as a foreign corporation in, among other jurisdictions, the state of California. 2. The Manufacturer has the full corporate power, authority, and legal right to execute, deliver and perform under the Manufacturer Documents and the execution, delivery and performance by the Manufacturer of its obligations under the Manufacturer Documents have been duly authorized by all necessary corporate action on the part of the Manufacturer. 3. The Manufacturer Documents have been duly executed and delivered by, and, on the assumption that they have been duly executed and delivered by all other parties thereto, constitute the legal, valid and binding obligations of, the Manufacturer, enforceable in accordance with the respective terms thereof, do not require any stockholder approval, do not, to the best of our knowledge, require any approval or consent of any trustee or holder of any indebtedness or obligations of the Manufacturer, and do not contravene the Certificate of Incorporation or by-laws of the Manufacturer, or any indenture, mortgage, contract, instrument, or other agreement, in each case known to us, to which the Manufacturer is a party or by which it or any of its properties is bound. 4. Good title to the Aircraft was at the time of delivery by the Manufacturer to the Lessee vested in the Manufacturer, free and clear of all liens, claims, encumbrances, security interests, and rights of others; and assuming the filing for recordation of the FAA Bill of Sale in accordance with the provisions of the Federal Aviation Act of 1958, as amended, good title to the Aircraft was on such date duly conveyed by the Manufacturer to the Lessee, free and clear of all liens, claims, encumbrances, security interests, and rights of others. 5. Each of the FAA Bill of Sale and the Warranty Bill of Sale covering the Aircraft constituted an effective instrument for the conveyance of good title to the Aircraft to the Lessee, given the filing for recordation of the FAA Bill of Sale for the Aircraft in accordance with the provisions of the Federal Aviation Act of 1958 as amended. 6. The Aircraft was duly delivered by the Manufacturer to the Lessee and (as evidenced by the Lessee's execution of a receipt for the Aircraft) duly accepted by the Lessee pursuant to the Purchase Agreement. For purposes of this opinion, I have assumed that the Lessee had the power and authority to accept title to and delivery of the Aircraft on the date of delivery and that the representative acting on behalf of the Lessee was duly authorized to accept title to and delivery of the Aircraft on the Lessee's behalf. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law). No opinion is expressed as to laws other than the corporate law of the State of Maryland, the laws of the State of California and the Federal laws of the United States of America. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Pratt & Whitney] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent) and (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor. I am an attorney employed by Pratt & Whitney (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Engine Consent and Agreement (the "Consent"). The Consent covers three Pratt & Whitney 4462 series engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. _______, dated as of _____________ between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Participation Agreement and the Purchase Agreement Assignment. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement and the Purchase Agreement Assignment. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement and the Purchase Agreement Assignment have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement and the Purchase Agreement Assignment have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement and the Consent. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement and the Consent was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement and the Consent has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of __________ and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N621FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from the Lessee, as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N621FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N621FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48792 and U.S. Registration No. N621FE (the "Airframe") and three (3) Pratt & Whitney 4462 aircraft engines bearing manufacturer's serial numbers ___-___, ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement II, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) dated as of June 15, 1998 (the "Purchase Agreement Assignment"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Seller"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Buyer"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Section 1 below; WHEREAS, the Buyer wishes to purchase the Aircraft, and the Seller, on the terms and conditions hereinafter set forth, is willing to sell and transfer title to the Aircraft to the Buyer; WHEREAS, the Buyer and the Seller are entering into the Lease pursuant to which the Aircraft will be leased by the Buyer to the Seller; and WHEREAS, the Seller, on the terms and conditions herein and in the Consent and Agreement of the Manufacturer and in the Engine Consent and Agreement of the Engine Manufacturer attached hereto, desires to assign to the Buyer certain of the Seller's rights and interests in and under the Purchase Agreement and the GTA relating to the Aircraft, and the Buyer desires to accept such assignment, as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties hereto agree as follows: Section 1. Definitions. For all purposes of this Purchase Agreement Assignment, except as otherwise expressly provided for or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the McDonnell Douglas MD-11F aircraft bearing United States Registration Number N621FE and Manufacturer's Serial Number 48792, which was delivered under the Purchase Agreement, including the Engines. "Engine Manufacturer" shall mean Pratt & Whitney, a Connecticut corporation. "Engines" shall mean the three (3) Pratt & Whitney 4462 turbofan jet engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. "Engine Warranties" shall mean the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty, and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of the GTA. "GTA" shall mean the General Terms Agreement dated as of ________________ between the Engine Manufacturer and the Seller but shall be limited to applicable engine warranties, as well as all of the terms and conditions, including the limitations, applicable hereto, as such provisions are assignable by the terms of this Agreement. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Buyer and the Seller, as the same may be amended, modified and supplemented, providing for the lease of the Aircraft. "Manufacturer" shall mean McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company, and its successors and assigns. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, by and among the Buyer, the Initial Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Seller, as the same may be amended, modified or supplemented. "Purchase Agreement" shall mean the Purchase Agreement A00431-B between the Seller and the Manufacturer, dated as of March 17, 1998, and as thereafter originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the foregoing relates to the Aircraft. "Purchase Price" shall mean the amount stated in Ancillary Agreement I. All other capitalized terms used herein and not otherwise defined shall have the meaning assigned to such term in the Lease. Section 2. Representation. The Seller does hereby represent and warrant that (a) it has furnished to the Buyer a true and complete copy of the Purchase Agreement and GTA as they relate to all of the Manufacturer's warranties and Engine Manufacturer's applicable warranties, as well as related obligations and rights in the Purchase Agreement and GTA, respectively, as assigned to the Buyer hereunder and (b) the Purchase Agreement and GTA are in full force and effect and the Seller is not in default thereunder. The Seller does hereby further represent and warrant that, to its knowledge, the Seller has, with the authorized execution of the Consent and Agreement and the Engine Consent and Agreement attached hereto, received all necessary consents to the assignment and transfer contemplated herein and that such consents are in full force and effect. The Seller does hereby further represent and warrant that the Seller has not assigned or pledged, and hereby covenants that it shall not assign or pledge, so long as this Purchase Agreement Assignment shall remain in effect, the whole or any part of the rights hereby assigned or any of its rights in respect of the Aircraft to anyone other than the Buyer. The Seller further represents and warrants for the benefit of the Buyer and the Owner Participant and their respective successors and assigns, as of the Delivery Date, that it is the lawful owner of the Aircraft; and, as of the Delivery Date that its title to the Aircraft is free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement covering the Aircraft, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease, and that, on the Delivery Date, the Buyer will receive good and marketable title to the Aircraft free and clear of all Liens other than rights of the Lessee under the Lease and the Lease Supplement, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease. Section 3. Assignment; Rights Reserved. Subject to the provisions of Section 5(a) hereof, the Seller does hereby sell, assign, transfer and set over unto the Buyer, except to the extent reserved below, all of the Seller's right, title and interest in the Purchase Agreement and the GTA pursuant to which the Seller acquired the Aircraft from the Manufacturer and Engine Manufacturer, as and to the extent that the same relate to the Aircraft and the purchase and operation thereof, including, without limitation, (a) all claims for damages in respect of the Aircraft arising as a result of any default by the Manufacturer under the Purchase Agreement or by the Engine Manufacturer under the GTA or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy, aircraft performance guarantee and indemnity provisions contained in the Purchase Agreement and the GTA and all claims thereunder, (b) any and all rights of the Seller to compel performance of the terms of the Purchase Agreement and the GTA in respect of the Aircraft and (c) any and all rights of the Seller under the Manufacturer's warranty bill of sale dated __________________ covering the Aircraft, the original of which is to delivered to the Indenture Trustee on the Delivery Date; reserving to the Seller, however, (i) all of the Seller's right, title and interest in and to the Purchase Agreement and the GTA as and to the extent that it relates to any matters other than in respect of the Aircraft, and (ii) with respect to the Aircraft so long, and only so long, as the Manufacturer and the Engine Manufacturer shall not have received notice from the Buyer as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all of the Seller's rights and interests in or arising out of any payments or deposits made relating to the Aircraft or to be made by the Seller or amounts credited or to be credited or paid or to be paid by the Manufacturer or Engine Manufacturer to the Seller in respect of the Aircraft and (iii) with respect to the Aircraft so long, and only so long, (x) as the Lease is in effect and (y) as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and Engine Manufacturer are obligated to provide or do provide pursuant to the Purchase Agreement and GTA with respect to the Aircraft. Section 4. Acceptance of Assignment. The Buyer hereby accepts the assignment contained in Section 3 hereof. Section 5. Rights of the Seller in Absence of Default. (a) Notwithstanding the foregoing, if and so long as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, (i) the Buyer authorizes the Seller during the Term on behalf of but to the exclusion of the Buyer, to exercise in Seller's own name (A) such rights and powers of the "Buyer" under the Purchase Agreement and GTA and (B) such rights as the Buyer may have with respect to the Aircraft under any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor with respect thereto and, subject to Section 5(c) hereof, to retain any recovery or benefit resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor in respect of the Aircraft, except that the Seller may not enter into any change order or other amendment, modification or supplement without the Buyer's prior written consent if such change order, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement as to the Aircraft or GTA as to the Engines or would otherwise materially adversely affect the Buyer's rights in the Aircraft or Engines, and (ii) the Buyer shall, at the Seller's expense, cooperate with the Seller and take such actions as the Seller reasonably deems necessary to enable the Seller to enforce such rights and claims. (b) Effective upon the receipt by the Manufacturer and Engine Manufacturer of written notice from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing and thereafter until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default have been cured or waived, (i) unless the Buyer in its sole discretion shall notify the Manufacturer and Engine Manufacturer to the contrary, the authorization given to the Seller under Section 5(a) hereof to enforce such rights and claims shall thenceforth cease to be effective and the Buyer and its successors and assigns shall, to the exclusion of the Seller, be entitled to assert and enforce such rights and claims as substitute party plaintiff or otherwise, and the Seller shall, at the request of the Buyer or its successors or assigns and at the Seller's expense, cooperate with and take such action as is reasonably necessary to enable the Buyer and its successors and assigns to enforce such rights and claims, and (ii) the Seller will be deemed to have constituted Buyer, its successors and permitted assigns, the Seller's true and lawful attorney, irrevocably (it being acknowledged that such appointment is coupled with an interest, namely the Buyer's rights acquired and to be acquired hereunder) with full power (in the name of the Seller or otherwise) to ask, require, demand, receive, compromise, settle, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement in respect of the Aircraft or the GTA in respect of the Engines, to the extent that the same have been assigned by this Purchase Agreement Assignment, and for such period as the Buyer may exercise rights with respect thereto under this clause (ii), to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith that the Buyer may deem to be necessary or advisable in the premises. (c) Notwithstanding this Purchase Agreement Assignment and anything contained herein to the contrary, all amounts that the Manufacturer or Engine Manufacturer are obligated to pay to the Seller under the Purchase Agreement and GTA with respect to the Aircraft or Engines, respectively, including, without limitation, in respect of refunds thereunder or resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement thereunder or the enforcement or exercise of any right or power under the Purchase Agreement (a "Manufacturer Payment") or under the GTA (an "Engine Manufacturer Payment") (excluding, however, from the Manufacturer Payments and Engine Manufacturer Payments any amounts the Manufacturer or Engine Manufacturer are obligated to pay to the Seller with respect to the rights reserved to the Seller in clauses (i) through (iii) of Section 3(b) hereof), will be payable and applicable as follows: all the Manufacturer Payments and Engine Manufacturer Payments shall be paid to the Seller unless and until the Manufacturer and Engine Manufacturer shall have received written notice as set forth in Section 5(d) from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer and Engine Manufacturer will, until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default under the Lease have been cured or waived, make any and all such payments directly to the Buyer. Any amounts received by the Buyer pursuant to the immediately preceding sentence shall, to the extent not theretofore applied in satisfaction of sums owing to the Buyer in accordance with the terms of the Lease, be returned to the Seller promptly after all Defaults or Events of Default under the Lease have been cured or waived. (d) For all purposes of this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer shall not be deemed to have knowledge of a declaration of an Event of Default or Default under the Lease or of the discontinuance or waiver of an Event of Default or Default unless and until the Manufacturer and Engine Manufacturer shall have received written notice thereof from the Owner Trustee addressed, in case of the Manufacturer, to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, and in the case of the Engine Manufacturer, to _________________________________________. When acting in accordance with the terms and conditions of the Purchase Agreement, the GTA and this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer may rely conclusively upon any such notice. Section 6. Certain Rights and Obligations of the Parties. (a) Anything herein contained to the contrary notwithstanding, (i) the Seller shall at all times remain liable to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft to perform all of its duties and obligations of "Buyer" thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (ii) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations, and (iii) except as provided in Section 6(b) hereof, neither the Buyer, the Indenture Trustee nor the Loan Certificate Holders shall have any obligation or liability under the Purchase Agreement or GTA by reason of, or arising out of, this Purchase Agreement Assignment or be obligated to perform any of the obligations or duties of the Seller under the Purchase Agreement or GTA or to make any payment or make any inquiry as to the sufficiency of any payment received by it or to present or to file any claim or to take any other action to collect or enforce any claim for any payment assigned thereunder. Notwithstanding anything in this Purchase Agreement Assignment or the attached Engine Consent and Agreement to the contrary, the Buyer and the Seller confirm expressly for the benefit of the Engine Manufacturer that: (i) The Buyer agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Seller incident to effecting the assignment herein; provided, however, that (1) the Buyer may use, retain and disclose such information to its special counsel and public accountants, who shall not further disclose such terms, (2) the Buyer may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to the Seller and to the Engine Manufacturer, and the Buyer shall afford the Seller and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, and (3) the Buyer may disclose such information to any bona fide potential purchaser of the Aircraft and/or the Engines (subject to execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). (ii) Without in any way releasing the Seller from any of its duties or obligations under the GTA, the Buyer agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (iii) It is expressly agreed that: (1) the Seller shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of the Seller thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (2) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations. (iv) Nothing contained in this Purchase Agreement Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. No further assignment of any remaining Engine Warranties, including but not limited to assignments for security purposes, are permitted without the express written consent of the Engine Manufacturer. (v) The Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of the Seller or the Buyer, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof. Such notice should be sent to: ______________________________________________. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of the Seller and the Buyer. So long as the Engine Manufacturer acts in good faith in accordance with this Purchase Agreement Assignment, the Engine Manufacturer may rely conclusively on any such notice without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. (b) Without in any way releasing the Seller from any of its duties or obligations under the Purchase Agreement or GTA, the Buyer confirms for the benefit of the Manufacturer and Engine Manufacturer that, insofar as the provisions of the Purchase Agreement and GTA relate to the Aircraft, each of (i) in exercising any rights under the Purchase Agreement or GTA, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement or GTA, the Purchase Agreement and GTA disclosed to the Buyer in writing and (ii) the provisions of the article of the Purchase Agreement entitled Assignment and Transfer regarding future assignment and transfer of rights under the Purchase Agreement, shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (c) Nothing contained herein shall (i) subject the Manufacturer or Engine Manufacturer to any liability to which it would not otherwise be subject under the Purchase Agreement or GTA or (ii) modify in any respect the Manufacturer's or Engine Manufacturer's contract rights thereunder, except as provided in the Consent and Agreement and Engine Consent and Agreement attached hereto. (d) The parties hereto, the Manufacturer by its execution and delivery of the Consent and Agreement and the Engine Manufacturer by its execution of the Engine Consent and Agreement, agree that all of the statements, representations, covenants and agreements made by the Buyer as Owner Trustee (when made in such capacity) contained in this Purchase Agreement Assignment and any agreement referred to herein or in the Participation Agreement other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Lessor's Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Lessor's Estate. Therefore, anything contained in this Purchase Agreement Assignment or such other agreements to the contrary notwithstanding (except for any express provisions that the Buyer is responsible for in its individual capacity), no recourse shall be had with respect to this Purchase Agreement Assignment or such other agreements against the Buyer in its individual capacity (or against any institution or person which becomes a successor trustee or co-trustee), the Owner Participant, or any officer, director, trustee, servant or direct or indirect parent or controlling person or persons of any of them; provided, however, that this Section 6(d) shall not be construed to prohibit any action or proceeding against the Owner Trustee in its individual capacity for its own willful misconduct or grossly negligent conduct; and provided, further, that nothing contained in this Section 6(d) shall be construed to limit the exercise and enforcement in accordance with the terms of this Purchase Agreement Assignment or such other agreements of rights and remedies against the Lessor's Estate. The foregoing provisions of this Section 6(d) shall survive the termination of this Purchase Agreement Assignment and the other Operative Agreements. (e) Nothing contained herein shall in any way diminish or limit the provisions of the Seller's indemnities in Article 9 of the Participation Agreement with respect to any liability of the Buyer, or any party to the Participation Agreement, to the Manufacturer in anyway relating to or arising out of the Purchase Agreement. Section 7. Further Assurances. The Seller agrees that at any time and from time to time the Seller shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Buyer may reasonably request in writing in order to obtain the full benefits of this Purchase Agreement Assignment and of the rights and powers herein granted. Section 8. No Amendment of Purchase Agreement and GTA. The Buyer agrees that it will not enter into any amendment, modification, supplement, rescission, cancellation or termination of the Purchase Agreement or GTA without the prior written consent of the Seller unless the Buyer shall have notified the Manufacturer and Engine Manufacturer as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, in which event any such amendment, modification, supplement, rescission, cancellation or termination shall relate solely to the rights assigned hereunder. Section 9. Binding Effect. This Purchase Agreement Assignment shall be binding upon and shall inure to the benefit of the Seller, the Buyer and their respective successors and permitted assigns. Section 10. Notice. Except as otherwise expressly provided herein, notice hereunder may be given, and shall be deemed to have been received, as provided in Section 25.01 of the Lease. Section 11. Simultaneous Execution. This Purchase Agreement Assignment is executed by the Buyer and the Seller concurrently with the execution and delivery of the Lease, the Participation Agreement and the Trust Agreement. Section 12. Grant of Security Interest. By the Indenture, the Buyer has granted to the Indenture Trustee, for the benefit of the Loan Certificate Holders, a security interest in all estate, right, title and interest of the Buyer in and to the Purchase Agreement, the GTA and this Purchase Agreement Assignment. Section 13. Counterparts. This Purchase Agreement Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 14. GOVERNING LAW. THIS PURCHASE AGREEMENT ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PROVISIONS), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION, Seller By: _______________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee, Buyer By: _______________________________________ Name: Title: CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) The undersigned, MCDONNELL DOUGLAS CORPORATION, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assignor") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Manufacturer under the Purchase Agreement with respect to the Aircraft to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Buyer" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement and future assignment or transfer of the Aircraft to a third party, the terms and conditions of the Purchase Agreement relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Manufacturer consents to the lease of the Aircraft by the Assignee to the Assignor under the Lease and agrees that the Purchase Agreement Assignment constitutes an agreement by the Assignee thereunder as required by Article 13 of the Purchase Agreement; (iv) the Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Aircraft under the Purchase Agreement unless and until the Manufacturer shall have received written notice from the Assignee addressed to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Aircraft under the Purchase Agreement (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Manufacturer agrees that it will not assert any liability claim against the Aircraft or any part thereof arising with respect to or in connection with any work performed by the Manufacturer or at its direction on the Aircraft on or prior to the date the Manufacturer conveys title to the Assignor. The Manufacturer hereby represents and warrants that: (i) it is a corporation duly organized and existing in good standing under the laws of the State of Maryland, (ii) the making and performance of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Manufacturer, do not require any stockholder or other approval, and do not contravene the Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which Manufacturer is a party or by which it is bound, and (iii) the making of the Purchase Agreement and this Consent and Agreement does not contravene, and to the best of the Manufacturer's knowledge, the Manufacturer's performance of the Purchase Agreement and this Consent and Agreement, does not contravene any law binding on the Manufacturer; and (iv) the Purchase Agreement constituted as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement has continued to constitute a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its terms and this Consent and Agreement constitutes a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its respective terms. The Manufacturer further represents and warrants that it has received payment in full with respect to the Aircraft. It is understood that this Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Manufacturer hereby represents and warrants that: 1. The Aircraft was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At time of delivery of the Aircraft to the Lessee, less than 50% of the fair market value of the Aircraft was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 McDONNELL DOUGLAS CORPORATION By: _______________________________________ Name: Title: ENGINE CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N611FE) Subject to the understanding that nothing contained in this Consent and Agreement or any other document pertaining thereto shall subject it to any liability or duplication of obligations to which it would not otherwise be subject under General Terms Agreement No. _______ dated as of ________________ (the "Engine Agreement") between it and Federal Express Corporation (the "Grantor") or modify in any respect its contract right thereunder, the undersigned, PRATT & WHITNEY, a Connecticut corporation (the "Engine Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assigner") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Engine Manufacturer under the GTA with respect to the Engines to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Airline" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the GTA, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Engine Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the GTA or in making any claim with respect to the Engines or other goods and services delivered or to be delivered pursuant to the GTA and future assignment or transfer of the Engines to a third party, the terms and conditions of the GTA relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Engine Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Engine Manufacturer consents to the lease of the Engines by the Assignee to the Assignor under the Lease; (iv) the Engine Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Engines under the GTA unless and until the Engine Manufacturer shall have received written notice from the Owner Trustee addressed to _________________________, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Engine Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Engines under the GTA (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Engine Manufacturer agrees that it will not assert any liability claim against the Engines arising with respect to or work performed by the Engine Manufacturer or at its direction on the Engines on or prior to the date the Manufacturer transferred title to the Assignor. The Engine Manufacturer hereby represents and warrants that: (i) the manufacturer is a corporation duly organized and existing in good standing under the laws of the State of New York; (ii) the making and performance of the GTA and this Engine Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any stockholder or other approval, and do not contravene the Engine Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound; (iii) the making of the GTA and this Engine Consent and Agreement does not contravene, and to the best of the Engines Manufacturer's knowledge, the Engine Manufacturer's performance of the GTA and this Engine Consent and Agreement, does not contravene any law binding on the Engine Manufacturer; (iv) the GTA constituted as of the date thereof and at all times thereafter to and including the date of this Engine Consent and Agreement has continued to constitute a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms and this Engine Consent and Agreement constitutes a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its respective terms and (v) it has received payment in full with respect to the Engines. It is understood that this Engine Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Engine Manufacturer hereby further represents and warrants that: 1. Each Engine was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At the time of delivery of each Engine to Lessee, less than 50% of the fair market value of the Engine was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 PRATT & WHITNEY By: _______________________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48794, REGISTRATION NO. N623FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 3 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 18 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 27 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 28 Section 6.02. Offering by Lessee....................................... 34 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 42 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate.......................................... 43 Section 7.02. Citizenship.............................................. 43 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 44 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 47 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 55 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 63 Section 8.05. Refunds.................................................. 65 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 72 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 73 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 78 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 79 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 80 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 83 Section 17.03. Counterparts............................................ 85 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee............................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms SCHEDULE VII Assumed Aircraft Value EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Manufacturer's Counsel EXHIBIT A(7) Opinion of Engine Manufacturer's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from the Lessee; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; and (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the Purchase Agreement to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and an Engine Consent and Agreement executed by the Engine Manufacturer, said Purchase Agreement Assignment, Consent and Agreement and Engine Consent and Agreement to be substantially in the form of Exhibit E hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Consent and Agreement and the Bills of Sale, the Owner Trustee will purchase, and receive title to, the Aircraft from the Lessee and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by the Lessee to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be a McDonnell Douglas MD-11F airframe having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) the Lessee shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the transfer by the Initial Owner Participant to the Owner Participant of its Beneficial Interest and the transfer of title to the Aircraft from the Lessee to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price, or such lesser amount referred to in the proviso to this Section 3.02(a), and (B) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from the Lessee, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Trust Agreement; (iv) the Intercreditor Agreement; (v) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (vi) the Collateral Agreement; and (vii) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Bills of Sale; (xi) the Purchase Agreement; (xii) the Purchase Agreement Assignment; (xiii) the Consent and Agreement and the Engine Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) counsel for the Engine Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of the FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include the Bills of Sale; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of the FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of the FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement and the Engine Consent and Agreement which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of the FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by the Lessee to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement or the Purchase Agreement Assignment and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, the FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, the FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by the Lessee, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Bills of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement or the Purchase Agreement Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4385416667% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, the Bills of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than March 15, 1999, or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N623FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2022 Principal Amount: $43,372,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N623FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $16,264,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N623FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $17,164,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N623FE and Manufacturer's serial number 48794, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N623FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N623FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N623FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $76,800,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes;. 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement; and 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Schedule VII hereto) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. SCHEDULE VII ASSUMED AIRCRAFT VALUE Assumed Aircraft Value (in millions) ---------------------------------- $108,430,000 EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one McDonnell Douglas MD-11F aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one McDonnell Douglas MD-11F Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N623FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one McDonnell Douglas MD-11F aircraft bearing U.S. Registration No. N623FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of McDonnell Douglas Corporation] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- You have requested that McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer") furnish you an opinion in connection with Section 4.02(d) of the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, with respect to a McDonnell Douglas Model MD-11F aircraft bearing Federal Aviation Administration registration number N623FE and Manufacturer's serial number 48794 (including the engines installed thereon but excluding equipment furnished by the Lessee therefor, the "Aircraft"). In this regard, the Office of the General Counsel for Douglas Aircraft Company, a division of the Manufacturer has examined and is familiar with the Manufacturer's Articles of Incorporation and Bylaws, as amended, including provisions thereof with respect to the Boards of Directors. In addition, we have examined, among other things (1) Purchase Agreement No. A00431B dated as of March 17, 1998 between the Lessee and the Manufacturer, (2) the Manufacturer's Consent and Agreement to the Purchase Agreement Assignment (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 between the Lessee and the Owner Trustee and (3) the Manufacturer's Warranty Bill of Sale and FAA Bill of Sale conveying title to the Aircraft to the Lessee (such documents executed by the Manufacturer are hereby collectively referred to as the "Manufacturer Documents"). Based upon the foregoing and upon statements of appropriate Manufacturer employees as to factual matters and upon examination of the law as it deems necessary for the purposes of this Opinion, this Office is of the following opinion: 1. The Manufacturer is a corporation duly incorporated and validly existing in good standing under the laws of the State of Maryland, and is duly qualified and authorized to do business as a foreign corporation in, among other jurisdictions, the state of California. 2. The Manufacturer has the full corporate power, authority, and legal right to execute, deliver and perform under the Manufacturer Documents and the execution, delivery and performance by the Manufacturer of its obligations under the Manufacturer Documents have been duly authorized by all necessary corporate action on the part of the Manufacturer. 3. The Manufacturer Documents have been duly executed and delivered by, and, on the assumption that they have been duly executed and delivered by all other parties thereto, constitute the legal, valid and binding obligations of, the Manufacturer, enforceable in accordance with the respective terms thereof, do not require any stockholder approval, do not, to the best of our knowledge, require any approval or consent of any trustee or holder of any indebtedness or obligations of the Manufacturer, and do not contravene the Certificate of Incorporation or by-laws of the Manufacturer, or any indenture, mortgage, contract, instrument, or other agreement, in each case known to us, to which the Manufacturer is a party or by which it or any of its properties is bound. 4. Good title to the Aircraft was at the time of delivery by the Manufacturer to the Lessee vested in the Manufacturer, free and clear of all liens, claims, encumbrances, security interests, and rights of others; and assuming the filing for recordation of the FAA Bill of Sale in accordance with the provisions of the Federal Aviation Act of 1958, as amended, good title to the Aircraft was on such date duly conveyed by the Manufacturer to the Lessee, free and clear of all liens, claims, encumbrances, security interests, and rights of others. 5. Each of the FAA Bill of Sale and the Warranty Bill of Sale covering the Aircraft constituted an effective instrument for the conveyance of good title to the Aircraft to the Lessee, given the filing for recordation of the FAA Bill of Sale for the Aircraft in accordance with the provisions of the Federal Aviation Act of 1958 as amended. 6. The Aircraft was duly delivered by the Manufacturer to the Lessee and (as evidenced by the Lessee's execution of a receipt for the Aircraft) duly accepted by the Lessee pursuant to the Purchase Agreement. For purposes of this opinion, I have assumed that the Lessee had the power and authority to accept title to and delivery of the Aircraft on the date of delivery and that the representative acting on behalf of the Lessee was duly authorized to accept title to and delivery of the Aircraft on the Lessee's behalf. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law). No opinion is expressed as to laws other than the corporate law of the State of Maryland, the laws of the State of California and the Federal laws of the United States of America. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Pratt & Whitney] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent) and (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor. I am an attorney employed by Pratt & Whitney (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Engine Consent and Agreement (the "Consent"). The Consent covers three Pratt & Whitney 4462 series engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. _______, dated as of _____________ between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Participation Agreement and the Purchase Agreement Assignment. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement and the Purchase Agreement Assignment. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement and the Purchase Agreement Assignment have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement and the Purchase Agreement Assignment have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement and the Consent. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement and the Consent was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement and the Consent has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of __________ and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N623FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from the Lessee, as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N623FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N623FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48794 and U.S. Registration No. N623FE (the "Airframe") and three (3) Pratt & Whitney 4462 aircraft engines bearing manufacturer's serial numbers ___-___, ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement II, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) dated as of June 15, 1998 (the "Purchase Agreement Assignment"), between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Seller"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Buyer"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Section 1 below; WHEREAS, the Buyer wishes to purchase the Aircraft, and the Seller, on the terms and conditions hereinafter set forth, is willing to sell and transfer title to the Aircraft to the Buyer; WHEREAS, the Buyer and the Seller are entering into the Lease pursuant to which the Aircraft will be leased by the Buyer to the Seller; and WHEREAS, the Seller, on the terms and conditions herein and in the Consent and Agreement of the Manufacturer and in the Engine Consent and Agreement of the Engine Manufacturer attached hereto, desires to assign to the Buyer certain of the Seller's rights and interests in and under the Purchase Agreement and the GTA relating to the Aircraft, and the Buyer desires to accept such assignment, as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties hereto agree as follows: Section 1. Definitions. For all purposes of this Purchase Agreement Assignment, except as otherwise expressly provided for or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the McDonnell Douglas MD-11F aircraft bearing United States Registration Number N623FE and Manufacturer's Serial Number 48794, which was delivered under the Purchase Agreement, including the Engines. "Engine Manufacturer" shall mean Pratt & Whitney, a Connecticut corporation. "Engines" shall mean the three (3) Pratt & Whitney 4462 turbofan jet engines bearing Engine Manufacturer's serial numbers ___-___, ___-___ and ___-___, respectively. "Engine Warranties" shall mean the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty, and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of the GTA. "GTA" shall mean the General Terms Agreement dated as of ________________ between the Engine Manufacturer and the Seller but shall be limited to applicable engine warranties, as well as all of the terms and conditions, including the limitations, applicable hereto, as such provisions are assignable by the terms of this Agreement. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Buyer and the Seller, as the same may be amended, modified and supplemented, providing for the lease of the Aircraft. "Manufacturer" shall mean McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company, and its successors and assigns. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, by and among the Buyer, the Initial Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Seller, as the same may be amended, modified or supplemented. "Purchase Agreement" shall mean the Purchase Agreement A00431-B between the Seller and the Manufacturer, dated as of March 17, 1998, and as thereafter originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the foregoing relates to the Aircraft. "Purchase Price" shall mean the amount stated in Ancillary Agreement I. All other capitalized terms used herein and not otherwise defined shall have the meaning assigned to such term in the Lease. Section 2. Representation. The Seller does hereby represent and warrant that (a) it has furnished to the Buyer a true and complete copy of the Purchase Agreement and GTA as they relate to all of the Manufacturer's warranties and Engine Manufacturer's applicable warranties, as well as related obligations and rights in the Purchase Agreement and GTA, respectively, as assigned to the Buyer hereunder and (b) the Purchase Agreement and GTA are in full force and effect and the Seller is not in default thereunder. The Seller does hereby further represent and warrant that, to its knowledge, the Seller has, with the authorized execution of the Consent and Agreement and the Engine Consent and Agreement attached hereto, received all necessary consents to the assignment and transfer contemplated herein and that such consents are in full force and effect. The Seller does hereby further represent and warrant that the Seller has not assigned or pledged, and hereby covenants that it shall not assign or pledge, so long as this Purchase Agreement Assignment shall remain in effect, the whole or any part of the rights hereby assigned or any of its rights in respect of the Aircraft to anyone other than the Buyer. The Seller further represents and warrants for the benefit of the Buyer and the Owner Participant and their respective successors and assigns, as of the Delivery Date, that it is the lawful owner of the Aircraft; and, as of the Delivery Date that its title to the Aircraft is free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement covering the Aircraft, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease, and that, on the Delivery Date, the Buyer will receive good and marketable title to the Aircraft free and clear of all Liens other than rights of the Lessee under the Lease and the Lease Supplement, the beneficial interest of the Owner Participant in the Aircraft and the Liens permitted by clause (c) of Section 6.01 of the Lease. Section 3. Assignment; Rights Reserved. Subject to the provisions of Section 5(a) hereof, the Seller does hereby sell, assign, transfer and set over unto the Buyer, except to the extent reserved below, all of the Seller's right, title and interest in the Purchase Agreement and the GTA pursuant to which the Seller acquired the Aircraft from the Manufacturer and Engine Manufacturer, as and to the extent that the same relate to the Aircraft and the purchase and operation thereof, including, without limitation, (a) all claims for damages in respect of the Aircraft arising as a result of any default by the Manufacturer under the Purchase Agreement or by the Engine Manufacturer under the GTA or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy, aircraft performance guarantee and indemnity provisions contained in the Purchase Agreement and the GTA and all claims thereunder, (b) any and all rights of the Seller to compel performance of the terms of the Purchase Agreement and the GTA in respect of the Aircraft and (c) any and all rights of the Seller under the Manufacturer's warranty bill of sale dated __________________ covering the Aircraft, the original of which is to delivered to the Indenture Trustee on the Delivery Date; reserving to the Seller, however, (i) all of the Seller's right, title and interest in and to the Purchase Agreement and the GTA as and to the extent that it relates to any matters other than in respect of the Aircraft, and (ii) with respect to the Aircraft so long, and only so long, as the Manufacturer and the Engine Manufacturer shall not have received notice from the Buyer as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all of the Seller's rights and interests in or arising out of any payments or deposits made relating to the Aircraft or to be made by the Seller or amounts credited or to be credited or paid or to be paid by the Manufacturer or Engine Manufacturer to the Seller in respect of the Aircraft and (iii) with respect to the Aircraft so long, and only so long, (x) as the Lease is in effect and (y) as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default has occurred and is continuing under the Lease, all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and Engine Manufacturer are obligated to provide or do provide pursuant to the Purchase Agreement and GTA with respect to the Aircraft. Section 4. Acceptance of Assignment. The Buyer hereby accepts the assignment contained in Section 3 hereof. Section 5. Rights of the Seller in Absence of Default. (a) Notwithstanding the foregoing, if and so long as the Manufacturer and Engine Manufacturer shall not have received notice from the Owner Trustee as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, (i) the Buyer authorizes the Seller during the Term on behalf of but to the exclusion of the Buyer, to exercise in Seller's own name (A) such rights and powers of the "Buyer" under the Purchase Agreement and GTA and (B) such rights as the Buyer may have with respect to the Aircraft under any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor with respect thereto and, subject to Section 5(c) hereof, to retain any recovery or benefit resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement of the Manufacturer, Engine Manufacturer or any subcontractor or vendor in respect of the Aircraft, except that the Seller may not enter into any change order or other amendment, modification or supplement without the Buyer's prior written consent if such change order, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement as to the Aircraft or GTA as to the Engines or would otherwise materially adversely affect the Buyer's rights in the Aircraft or Engines, and (ii) the Buyer shall, at the Seller's expense, cooperate with the Seller and take such actions as the Seller reasonably deems necessary to enable the Seller to enforce such rights and claims. (b) Effective upon the receipt by the Manufacturer and Engine Manufacturer of written notice from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing and thereafter until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default have been cured or waived, (i) unless the Buyer in its sole discretion shall notify the Manufacturer and Engine Manufacturer to the contrary, the authorization given to the Seller under Section 5(a) hereof to enforce such rights and claims shall thenceforth cease to be effective and the Buyer and its successors and assigns shall, to the exclusion of the Seller, be entitled to assert and enforce such rights and claims as substitute party plaintiff or otherwise, and the Seller shall, at the request of the Buyer or its successors or assigns and at the Seller's expense, cooperate with and take such action as is reasonably necessary to enable the Buyer and its successors and assigns to enforce such rights and claims, and (ii) the Seller will be deemed to have constituted Buyer, its successors and permitted assigns, the Seller's true and lawful attorney, irrevocably (it being acknowledged that such appointment is coupled with an interest, namely the Buyer's rights acquired and to be acquired hereunder) with full power (in the name of the Seller or otherwise) to ask, require, demand, receive, compromise, settle, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement in respect of the Aircraft or the GTA in respect of the Engines, to the extent that the same have been assigned by this Purchase Agreement Assignment, and for such period as the Buyer may exercise rights with respect thereto under this clause (ii), to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith that the Buyer may deem to be necessary or advisable in the premises. (c) Notwithstanding this Purchase Agreement Assignment and anything contained herein to the contrary, all amounts that the Manufacturer or Engine Manufacturer are obligated to pay to the Seller under the Purchase Agreement and GTA with respect to the Aircraft or Engines, respectively, including, without limitation, in respect of refunds thereunder or resulting from the enforcement of any warranty, covenant, representation, service life policy, aircraft performance guarantee, indemnity or product support agreement thereunder or the enforcement or exercise of any right or power under the Purchase Agreement (a "Manufacturer Payment") or under the GTA (an "Engine Manufacturer Payment") (excluding, however, from the Manufacturer Payments and Engine Manufacturer Payments any amounts the Manufacturer or Engine Manufacturer are obligated to pay to the Seller with respect to the rights reserved to the Seller in clauses (i) through (iii) of Section 3(b) hereof), will be payable and applicable as follows: all the Manufacturer Payments and Engine Manufacturer Payments shall be paid to the Seller unless and until the Manufacturer and Engine Manufacturer shall have received written notice as set forth in Section 5(d) from the Owner Trustee that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer and Engine Manufacturer will, until the Manufacturer and Engine Manufacturer shall have received written notice from the Owner Trustee that all Defaults or Events of Default under the Lease have been cured or waived, make any and all such payments directly to the Buyer. Any amounts received by the Buyer pursuant to the immediately preceding sentence shall, to the extent not theretofore applied in satisfaction of sums owing to the Buyer in accordance with the terms of the Lease, be returned to the Seller promptly after all Defaults or Events of Default under the Lease have been cured or waived. (d) For all purposes of this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer shall not be deemed to have knowledge of a declaration of an Event of Default or Default under the Lease or of the discontinuance or waiver of an Event of Default or Default unless and until the Manufacturer and Engine Manufacturer shall have received written notice thereof from the Owner Trustee addressed, in case of the Manufacturer, to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, and in the case of the Engine Manufacturer, to _________________________________________. When acting in accordance with the terms and conditions of the Purchase Agreement, the GTA and this Purchase Agreement Assignment, the Manufacturer and Engine Manufacturer may rely conclusively upon any such notice. Section 6. Certain Rights and Obligations of the Parties. (a) Anything herein contained to the contrary notwithstanding, (i) the Seller shall at all times remain liable to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft to perform all of its duties and obligations of "Buyer" thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (ii) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Manufacturer and Engine Manufacturer under the Purchase Agreement and GTA in respect of the Aircraft except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations, and (iii) except as provided in Section 6(b) hereof, neither the Buyer, the Indenture Trustee nor the Loan Certificate Holders shall have any obligation or liability under the Purchase Agreement or GTA by reason of, or arising out of, this Purchase Agreement Assignment or be obligated to perform any of the obligations or duties of the Seller under the Purchase Agreement or GTA or to make any payment or make any inquiry as to the sufficiency of any payment received by it or to present or to file any claim or to take any other action to collect or enforce any claim for any payment assigned thereunder. Notwithstanding anything in this Purchase Agreement Assignment or the attached Engine Consent and Agreement to the contrary, the Buyer and the Seller confirm expressly for the benefit of the Engine Manufacturer that: (i) The Buyer agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Seller incident to effecting the assignment herein; provided, however, that (1) the Buyer may use, retain and disclose such information to its special counsel and public accountants, who shall not further disclose such terms, (2) the Buyer may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to the Seller and to the Engine Manufacturer, and the Buyer shall afford the Seller and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, and (3) the Buyer may disclose such information to any bona fide potential purchaser of the Aircraft and/or the Engines (subject to execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). (ii) Without in any way releasing the Seller from any of its duties or obligations under the GTA, the Buyer agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (iii) It is expressly agreed that: (1) the Seller shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of the Seller thereunder to the same extent as if this Purchase Agreement Assignment had not been executed, (2) the exercise by the Buyer of any of the rights assigned hereunder shall not release the Seller from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Buyer shall constitute performance of such duties and obligations. (iv) Nothing contained in this Purchase Agreement Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. No further assignment of any remaining Engine Warranties, including but not limited to assignments for security purposes, are permitted without the express written consent of the Engine Manufacturer. (v) The Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of the Seller or the Buyer, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof. Such notice should be sent to: ______________________________________________. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of the Seller and the Buyer. So long as the Engine Manufacturer acts in good faith in accordance with this Purchase Agreement Assignment, the Engine Manufacturer may rely conclusively on any such notice without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. (b) Without in any way releasing the Seller from any of its duties or obligations under the Purchase Agreement or GTA, the Buyer confirms for the benefit of the Manufacturer and Engine Manufacturer that, insofar as the provisions of the Purchase Agreement and GTA relate to the Aircraft, each of (i) in exercising any rights under the Purchase Agreement or GTA, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement or GTA, the Purchase Agreement and GTA disclosed to the Buyer in writing and (ii) the provisions of the article of the Purchase Agreement entitled Assignment and Transfer regarding future assignment and transfer of rights under the Purchase Agreement, shall apply to, and be binding upon, the Buyer to the same extent as the Seller. (c) Nothing contained herein shall (i) subject the Manufacturer or Engine Manufacturer to any liability to which it would not otherwise be subject under the Purchase Agreement or GTA or (ii) modify in any respect the Manufacturer's or Engine Manufacturer's contract rights thereunder, except as provided in the Consent and Agreement and Engine Consent and Agreement attached hereto. (d) The parties hereto, the Manufacturer by its execution and delivery of the Consent and Agreement and the Engine Manufacturer by its execution of the Engine Consent and Agreement, agree that all of the statements, representations, covenants and agreements made by the Buyer as Owner Trustee (when made in such capacity) contained in this Purchase Agreement Assignment and any agreement referred to herein or in the Participation Agreement other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Lessor's Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Lessor's Estate. Therefore, anything contained in this Purchase Agreement Assignment or such other agreements to the contrary notwithstanding (except for any express provisions that the Buyer is responsible for in its individual capacity), no recourse shall be had with respect to this Purchase Agreement Assignment or such other agreements against the Buyer in its individual capacity (or against any institution or person which becomes a successor trustee or co-trustee), the Owner Participant, or any officer, director, trustee, servant or direct or indirect parent or controlling person or persons of any of them; provided, however, that this Section 6(d) shall not be construed to prohibit any action or proceeding against the Owner Trustee in its individual capacity for its own willful misconduct or grossly negligent conduct; and provided, further, that nothing contained in this Section 6(d) shall be construed to limit the exercise and enforcement in accordance with the terms of this Purchase Agreement Assignment or such other agreements of rights and remedies against the Lessor's Estate. The foregoing provisions of this Section 6(d) shall survive the termination of this Purchase Agreement Assignment and the other Operative Agreements. (e) Nothing contained herein shall in any way diminish or limit the provisions of the Seller's indemnities in Article 9 of the Participation Agreement with respect to any liability of the Buyer, or any party to the Participation Agreement, to the Manufacturer in anyway relating to or arising out of the Purchase Agreement. Section 7. Further Assurances. The Seller agrees that at any time and from time to time the Seller shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Buyer may reasonably request in writing in order to obtain the full benefits of this Purchase Agreement Assignment and of the rights and powers herein granted. Section 8. No Amendment of Purchase Agreement and GTA. The Buyer agrees that it will not enter into any amendment, modification, supplement, rescission, cancellation or termination of the Purchase Agreement or GTA without the prior written consent of the Seller unless the Buyer shall have notified the Manufacturer and Engine Manufacturer as set forth in Section 5(d) hereof that a Default or an Event of Default under the Lease has occurred and is continuing, in which event any such amendment, modification, supplement, rescission, cancellation or termination shall relate solely to the rights assigned hereunder. Section 9. Binding Effect. This Purchase Agreement Assignment shall be binding upon and shall inure to the benefit of the Seller, the Buyer and their respective successors and permitted assigns. Section 10. Notice. Except as otherwise expressly provided herein, notice hereunder may be given, and shall be deemed to have been received, as provided in Section 25.01 of the Lease. Section 11. Simultaneous Execution. This Purchase Agreement Assignment is executed by the Buyer and the Seller concurrently with the execution and delivery of the Lease, the Participation Agreement and the Trust Agreement. Section 12. Grant of Security Interest. By the Indenture, the Buyer has granted to the Indenture Trustee, for the benefit of the Loan Certificate Holders, a security interest in all estate, right, title and interest of the Buyer in and to the Purchase Agreement, the GTA and this Purchase Agreement Assignment. Section 13. Counterparts. This Purchase Agreement Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 14. GOVERNING LAW. THIS PURCHASE AGREEMENT ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PROVISIONS), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION, Seller By: _______________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee, Buyer By: _______________________________________ Name: Title: CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) The undersigned, MCDONNELL DOUGLAS CORPORATION, a wholly-owned subsidiary of The Boeing Company (the "Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assignor") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Manufacturer under the Purchase Agreement with respect to the Aircraft to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Buyer" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement and future assignment or transfer of the Aircraft to a third party, the terms and conditions of the Purchase Agreement relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Manufacturer consents to the lease of the Aircraft by the Assignee to the Assignor under the Lease and agrees that the Purchase Agreement Assignment constitutes an agreement by the Assignee thereunder as required by Article 13 of the Purchase Agreement; (iv) the Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Aircraft under the Purchase Agreement unless and until the Manufacturer shall have received written notice from the Assignee addressed to 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Aircraft under the Purchase Agreement (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Manufacturer agrees that it will not assert any liability claim against the Aircraft or any part thereof arising with respect to or in connection with any work performed by the Manufacturer or at its direction on the Aircraft on or prior to the date the Manufacturer conveys title to the Assignor. The Manufacturer hereby represents and warrants that: (i) it is a corporation duly organized and existing in good standing under the laws of the State of Maryland, (ii) the making and performance of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Manufacturer, do not require any stockholder or other approval, and do not contravene the Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which Manufacturer is a party or by which it is bound, and (iii) the making of the Purchase Agreement and this Consent and Agreement does not contravene, and to the best of the Manufacturer's knowledge, the Manufacturer's performance of the Purchase Agreement and this Consent and Agreement, does not contravene any law binding on the Manufacturer; and (iv) the Purchase Agreement constituted as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement has continued to constitute a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its terms and this Consent and Agreement constitutes a binding obligation of the Manufacturer enforceable against the Manufacturer in accordance with its respective terms. The Manufacturer further represents and warrants that it has received payment in full with respect to the Aircraft. It is understood that this Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Manufacturer hereby represents and warrants that: 1. The Aircraft was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At time of delivery of the Aircraft to the Lessee, less than 50% of the fair market value of the Aircraft was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 McDONNELL DOUGLAS CORPORATION By: _______________________________________ Name: Title: ENGINE CONSENT AND AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N611FE) Subject to the understanding that nothing contained in this Consent and Agreement or any other document pertaining thereto shall subject it to any liability or duplication of obligations to which it would not otherwise be subject under General Terms Agreement No. _______ dated as of ________________ (the "Engine Agreement") between it and Federal Express Corporation (the "Grantor") or modify in any respect its contract right thereunder, the undersigned, PRATT & WHITNEY, a Connecticut corporation (the "Engine Manufacturer"), hereby acknowledges notice of, and consents to, all of the terms of, the Purchase Agreement Assignment (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment"; capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Purchase Agreement Assignment), between Federal Express Corporation, a Delaware corporation ("Assigner") and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Assignee") and hereby confirms to the Assignor and the Assignee, and agrees, that: (i) all representations, warranties, indemnities and agreements of the Engine Manufacturer under the GTA with respect to the Engines to the extent assigned by the Assignor to the Assignee, shall inure to the benefit of the Assignee to the same extent as if originally named the "Airline" therein, subject to the terms and conditions of the Purchase Agreement Assignment; (ii) the Assignee shall not be liable for any of the obligations or duties of the Assignor under the GTA, nor shall the Purchase Agreement Assignment give rise to any duties or obligations whatsoever on the part of the Assignee owing to the Engine Manufacturer, except for the Assignee's agreement in the Purchase Agreement Assignment to the effect that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the GTA or in making any claim with respect to the Engines or other goods and services delivered or to be delivered pursuant to the GTA and future assignment or transfer of the Engines to a third party, the terms and conditions of the GTA relating to the Aircraft shall apply to, and be binding upon, the Assignee to the same extent as the Assignor; provided, that no person other than the Engine Manufacturer shall have any rights against the Assignee with respect to the undertaking and agreement set forth in this clause (ii); (iii) the Engine Manufacturer consents to the lease of the Engines by the Assignee to the Assignor under the Lease; (iv) the Engine Manufacturer will continue to pay to the Assignor all payments which the Manufacturer may be required to make in respect to the Engines under the GTA unless and until the Engine Manufacturer shall have received written notice from the Owner Trustee addressed to _________________________, that a Default or an Event of Default under the Lease has occurred and is continuing, whereupon the Engine Manufacturer will make any and all payments, including warranty and indemnity payments, which it may be required to make in respect to the Engines under the GTA (to the extent the right to receive such payments has been assigned under the Purchase Agreement Assignment) directly to the Assignee at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department (provided, that, as long as the Indenture shall not have been discharged, such payment shall be made directly to the Indenture Trustee at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department); and (v) the Engine Manufacturer agrees that it will not assert any liability claim against the Engines arising with respect to or work performed by the Engine Manufacturer or at its direction on the Engines on or prior to the date the Manufacturer transferred title to the Assignor. The Engine Manufacturer hereby represents and warrants that: (i) the manufacturer is a corporation duly organized and existing in good standing under the laws of the State of New York; (ii) the making and performance of the GTA and this Engine Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any stockholder or other approval, and do not contravene the Engine Manufacturer's Certificate of Incorporation or By-Laws or any indenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound; (iii) the making of the GTA and this Engine Consent and Agreement does not contravene, and to the best of the Engines Manufacturer's knowledge, the Engine Manufacturer's performance of the GTA and this Engine Consent and Agreement, does not contravene any law binding on the Engine Manufacturer; (iv) the GTA constituted as of the date thereof and at all times thereafter to and including the date of this Engine Consent and Agreement has continued to constitute a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms and this Engine Consent and Agreement constitutes a binding obligation of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its respective terms and (v) it has received payment in full with respect to the Engines. It is understood that this Engine Consent and Agreement is subject to the condition that the Lease shall have been entered into by the Assignor and the Assignee. The Engine Manufacturer hereby further represents and warrants that: 1. Each Engine was manufactured in the United States within the meaning of Section 927(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by a person or persons other than a foreign sales corporation, as defined in Section 922(a) of the Code; and 2. At the time of delivery of each Engine to Lessee, less than 50% of the fair market value of the Engine was attributable to articles imported into the United States within the meaning of Section 927(a)(1)(c) of the Code. Dated as of June 15, 1998 PRATT & WHITNEY By: _______________________________________ Name: Title: - -------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) Dated as of June 1, 1998 Amended and Restated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee PMCC LEASING CORPORATION, Owner Participant MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Original Loan Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 789, REGISTRATION NO. N675FE TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 Section 2.01. Transfer of Funds........................................ 4 Section 2.02. Certificates............................................. 7 Section 2.03. Owner Participant's Instructions to Owner Trustee........ 7 ARTICLE 3 EXTENT OF INTEREST OF ORIGINAL LOAN PARTICIPANT Section 3.01. Extent of Interest of Original Loan Participant.......... 7 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent..................................... 8 Section 4.02. Opinion of Special Aviation Counsel...................... 18 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 19 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 19 Section 6.02. Offering by Lessee....................................... 25 Section 6.03. Certain Covenants of Lessee.............................. 25 Section 6.04. Survival of Representations and Warranties............... 33 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 33 Section 7.02. Citizenship.............................................. 34 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 35 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 40 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 43 Section 7.06. Indenture Trustee's Notice of Default.................... 44 Section 7.07. Releases from Indenture.................................. 44 Section 7.08. Covenant of Quiet Enjoyment.............................. 44 Section 7.09. Original Loan Participant's and Pass Through Trustee's Representations and Warranties........................... 45 Section 7.10. Survival of Representations, Warranties and Covenants.... 46 Section 7.11. Lessee's Assumption of the Certificates.................. 46 Section 7.12. Indebtedness of Owner Trustee............................ 48 Section 7.13. Compliance with Trust Agreement, Etc Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 49 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 51 Section 8.02. After-Tax Basis.......................................... 57 Section 8.03. Time of Payment.......................................... 57 Section 8.04. Contests................................................. 58 Section 8.05. Refunds.................................................. 60 Section 8.06. Lessee's Reports......................................... 61 Section 8.07. Survival of Obligations.................................. 61 Section 8.08. Payment of Taxes......................................... 61 Section 8.09. Reimbursements by Indemnitees Generally.................. 62 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 62 Section 9.02. After-Tax Basis.......................................... 66 Section 9.03. Subrogation.............................................. 66 Section 9.04. Notice and Payment....................................... 67 Section 9.05. Refunds.................................................. 67 Section 9.06. Defense of Claims........................................ 67 Section 9.07. Survival of Obligations.................................. 68 Section 9.08. Effect of Other Indemnities.............................. 69 Section 9.09. Interest................................................. 69 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 69 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 72 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 73 Section 12.02. Interest of Holders of Certificates..................... 73 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 74 Section 13.02. Further Assurances...................................... 74 Section 13.03. No Retroactive Application.............................. 74 Section 13.04. Pass Through Trustee's and Subordination Agent's Acknowledgement......................................... 74 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 75 ARTICLE 15 REFINANCING/REOPTIMIZATION Section 15.01. Refinancing............................................. 76 Section 15.02. Reoptimization.......................................... 79 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. Owner for Federal Tax Purposes.......................... 81 Section 17.02. [Reserved].............................................. 81 Section 17.03. Counterparts............................................ 81 Section 17.04. No Oral Modifications................................... 81 Section 17.05. Captions................................................ 82 Section 17.06. Successors and Assigns.................................. 82 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee.................................... 82 Section 17.08. Severability............................................ 83 Section 17.09. Public Release of Information........................... 83 Section 17.10. Certain Limitations on Reorganization................... 83 Section 17.11. GOVERNING LAW........................................... 84 Section 17.12. Section 1110 Compliance................................. 84 Section 17.13. Reliance of Liquidity Providers......................... 84 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 84 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List EXHIBIT A(1)(a) Opinion of Lessee's Counsel EXHIBIT A(1)(b) Opinion of Lessee's Special Counsel EXHIBIT A(2)(a) Opinion of Owner Participant's and Owner Participant Guarantor's Special Counsel EXHIBIT A(2)(b) Opinion of Owner Participant's and Owner Participant Guarantor's Counsel EXHIBIT A(3) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(4) Opinion of Owner Trustee's Special Counsel EXHIBIT A(5) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(6)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(6)(b) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(7) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E-1 Form of Assignment and Assumption Agreement EXHIBIT E-2 Form of Owner Participant Guaranty PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee"), PMCC LEASING CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Owner Participant"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (together with its successors and permitted assigns, the "Original Loan Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee entered into the Original Participation Agreement, providing for the sale and lease of the Aircraft that was delivered on the Delivery Date; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Participant entered into the Original Trust Agreement relating to the Aircraft with SSB in its individual capacity, pursuant to which SSB agreed, among other things, to hold the Lessor's Estate in trust for the benefit of the Owner Participant; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Indenture Trustee entered into the Original Indenture, for the benefit of the Original Loan Participant, pursuant to which the Owner Trustee issued to the Original Loan Participant the Original Loan Certificates as evidence of the loans made by the Original Loan Participant to the Owner Trustee, the proceeds of which were used by the Owner Trustee to pay a portion of the Purchase Price for the Aircraft; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Lessee entered into the Original Lease relating to the Aircraft, whereby, subject to the terms and conditions set forth in said Lease, the Owner Trustee agreed to lease the Aircraft to the Lessee, and the Lessee agreed to lease the Aircraft from the Owner Trustee, such lease of the Aircraft being evidenced by the execution and delivery of the Lease Supplement; WHEREAS, Article 15 of the Original Participation Agreement permits a Refinancing of the Original Loan Certificates subject to the satisfaction of the conditions specified in Section 15.01 thereof, and Section 3.04 of the Original Lease contemplates the adjustment of the percentages for Basic Rent, Stipulated Loss Value and Termination Value in the event of such a Refinancing, and the Lessee has requested that the Owner Trustee effect such a Refinancing and adjustment; WHEREAS, in order to facilitate such Refinancing, the Lessee is concurrently entering into an Underwriting Agreement, which relates to three series of Pass Through Certificates that will be issued by the Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular Series and having a particular Maturity that will be issued under the Indenture; WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of the Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto, the proceeds of which purchase in turn will be applied to the Refinancing in full of the outstanding principal amount of the Original Loan Certificates; WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee have agreed, subject to the terms and conditions hereinafter provided, to amend and restate, and to add each of the Pass Through Trustee and the Subordination Agent as a party to, the Original Participation Agreement; WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement; WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts; and WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Original Loan Participant and the Indenture Trustee have agreed, to the extent they are parties thereto and, subject to the terms and conditions hereinafter provided, to amend and restate the Original Indenture, to amend and restate the Original Lease, to amend and restate the Original Ancillary Agreement I, to amend the Original Tax Indemnity Agreement and to amend and restate the Original Trust Agreement, each such amendment and restatement to be executed and delivered simultaneously with the purchase of the Certificates by the Pass Through Trustee for the Pass Through Trusts and the Refinancing in full of the Original Loan Certificates. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree, subject to the terms and conditions hereinafter provided, that the Original Participation Agreement be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; REFUNDING THE ORIGINAL LOAN CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Refunding Date the following events shall occur in the order set forth below: (i) the Lessee shall on behalf of the Owner Trustee execute a wire transfer or intra-bank transfer in favor of the Agent (as a prepayment of the portion of Basic Rent allocable to the period from the Closing Date through the Refunding Date) in the amount of all accrued and unpaid interest on the Original Loan Certificates to but excluding the Refunding Date, which transfer shall constitute the payment of all such accrued and unpaid interest; (ii) the Lessee shall on behalf of the Owner Trustee execute a wire transfer or intra-bank transfer in favor of the Agent as Supplemental Rent in the amount of any Breakage Costs required to be paid pursuant to the Original Indenture which transfer shall constitute the payment of all such Breakage Costs; (iii) for each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall pay on behalf of the Owner Trustee in the manner specified in paragraph (iv) below, an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture; (iv) the aggregate amount payable by the Pass Through Trustee pursuant to paragraph (iii) above shall be payable by wire transfer or intra-bank transfer in favor of the Agent on behalf of the Owner Trustee in the amount of the outstanding principal amount of the Original Loan Certificates; (v) the Agent shall apply the amounts received by it under paragraphs (i), (ii) and (iv) of this subsection (b) to prepay the Original Loan Certificates in full in accordance with Sections 2.06 and 2.10 of the Original Indenture; and (vi) the Owner Trustee shall cause the Certificates to be delivered to the applicable Pass Through Trustee in accordance with Section 2.02 hereof. On the Refunding Date concurrently with the events specified in clauses (iii) through (v) of this Section 2.01(b), the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not a party thereto), the Indenture, the Lease and the Trust Agreement, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. The Owner Participant hereby requests and directs the Owner Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions specified herein. The Original Loan Participant by its execution and delivery hereof, requests and directs the Indenture Trustee to execute and deliver this Agreement and concurrently with the events specified in clauses (iii) through (v) of this Section 2.01(b) and subject to the terms and conditions hereof to take the actions contemplated herein. The parties hereto, including, without limitation, the Original Loan Participant, confirm that, as provided in Section 2.06 of the Original Indenture, upon payment in full of the principal amount, Breakage Costs, if any, and interest on the Original Loan Certificates and all other sums then payable to the Original Loan Participant under the Original Agreements to the extent specified in subsection (c) below, the Original Loan Participant shall have no further interest in, or other right or obligation with respect to, the Trust Indenture Estate, the Original Agreements or the Operative Agreements (it being understood that the foregoing shall not limit or detract from any claim that the Original Loan Participant may have under Article 8 or 9 or Section 10.01(a)(ii) hereof or of the Original Participation Agreement) and, accordingly, have no obligation to, and will not attempt to direct any future actions of the Indenture Trustee with respect to the Trust Indenture Estate, provided that the rights and obligations of the Original Loan Participant shall, until the payment in full of such amounts to the Agent on behalf of the Original Loan Participant on the Refunding Date, be governed by the Original Participation Agreement and the other Operative Agreements contemplated thereby or in effect immediately prior to the effectiveness of this Agreement and shall, upon such payment and thereafter, be governed by this Agreement. The Lessee hereby consents to the foregoing. (c) Not less than three (3) Business Days prior to the Refunding Date, the Agent on behalf of the Original Loan Participant shall give notice in writing to the parties hereto of the principal amount, Breakage Costs, if any, and interest on and all other amounts due on the Refunding Date under the Original Loan Certificates and all other sums payable on the Refunding Date to the Original Loan Participant under the Original Agreements, such notice to be deemed final and binding on the Original Loan Participant as to the respective amounts of principal, Breakage Costs, if any, and interest when given; provided that the expected Refunding Date, at the time such notice is given, is the same as the Refunding Date. (d) On the Refunding Date, subject to (i) the giving of the written notice referred to in Section 2.01(c) above to the Indenture Trustee and the Original Loan Participant, (ii) the receipt by the Original Loan Participant of the funds referred to in Section 2.01(b)(v) above and (iii) compliance with the provisions of Article 15 of the Original Participation Agreement and Section 2.10(c) of the Original Indenture (including the Refinancing in full of the Original Loan Certificates), the Original Loan Participant shall deliver the Original Loan Certificates to the Indenture Trustee for cancellation and delivery to the Owner Trustee. (e) The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the Refinancing of the Original Loan Certificates (together, the "Closings") shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. (f) All payments pursuant to this Section 2.01 shall be made in immediately available funds. (g) In the event that the Refunding Date and the actions contemplated to occur on such date pursuant to subsection (d) of this Section 2.01 do not occur on or before July 30, 1998, then the rights and obligations of the parties to the Original Participation Agreement, including, without limitation, the Original Loan Participant and the Indenture Trustee, shall be governed by the Original Participation Agreement and the other Operative Agreements contemplated thereby or in effect immediately prior to the effectiveness of this Agreement and this Agreement shall be of no further force and effect, except that the Lessee shall be obligated hereby to pay all fees and expenses of the Original Loan Participant, the Indenture Trustee, the Owner Participant, the Owner Trustee, the Pass Through Trustee and their respective counsel relating to the transactions contemplated hereby. Each of the parties hereto agrees to execute and deliver to the other parties such documents and instruments as may be necessary to give effect to the foregoing provisions of this subsection (g). Section 2.02. Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Refunding Date, the Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Refunding Date and shall bear interest from the Refunding Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. Section 2.03. Owner Participant's Instructions to Owner Trustee. The Owner Participant agrees that the issuance of Certificates in accordance with the terms hereof shall constitute, without further act, authorization and direction by the Owner Participant to the Owner Trustee to take the actions specified in Section 1.01 of the Trust Agreement and confirmation that all conditions to closing set forth in Article 4 hereof were either met to the satisfaction of the Owner Participant or, if not so met, were in any event waived by it. ARTICLE 3 EXTENT OF INTEREST OF ORIGINAL LOAN PARTICIPANT Section 3.01. Extent of Interest of Original Loan Participant. Delivery of the Original Loan Certificates by the Original Loan Participant to the Indenture Trustee for cancellation on the Refunding Date shall be conclusive evidence of receipt by the Original Loan Participant of all amounts then due and payable to the Original Loan Participant in respect of principal of, Breakage Costs, if any, and interest on the Original Loan Certificates under the Original Agreements (it being understood that the foregoing shall not limit or detract from any claim the Original Loan Participant may have under Article 8 or 9 or Section 10.01(a)(ii) hereof or of the Original Participation Agreement). ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent. The obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Refunding Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Refunding Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Refunding Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Refunding Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Refunding Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Refunding Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Refunding Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Refunding Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent or the Owner Participant, as the case may be, of such documents shall have been delivered to the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) in the case of the Owner Participant only, Amendment No. 1 to the Original Tax Indemnity Agreement; (iv) the Trust Agreement; (v) each Ancillary Agreement; (vi) the Owner Participant Guaranty; (vii) the Owner Trustee Guaranty; (viii) the Intercreditor Agreement; and (ix) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates. (e) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee, each Liquidity Provider and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee, each Liquidity Provider and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (f) Financing Statements. (i) UCC financing statements covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Original Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Original Loan Participant, and such financing statements shall have been duly filed in the State of Connecticut; (ii) a form UCC-3 financing statement to amend and restate each financing statement referred to in the immediately preceding sentence shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the Refinancing of the Original Loan Certificates such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture; (iii) a UCC notice filing describing the Original Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee; and (iv) a form UCC-3 financing statement to amend and restate the UCC notice filing referred to in the immediately preceding clause (iii) shall have been executed and delivered by the Owner Trustee, as lessor, and by the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and such notice filing shall concurrently with the Refinancing of the Original Loan Certificates have been duly filed in the State of Tennessee, and all other actions shall have been taken which, in the opinion of the Owner Participant, the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests created by or pursuant to the Granting Clause of the Indenture. (g) Corporate Documents. Except when such Person is the delivering party, the Owner Participant, the Owner Trustee, the Original Loan Participant, the Pass Through Trustee, the Subordination Agent, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Refunding Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Refunding Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of the Original Agreements to which it is a party, this Agreement, the Lease, the Tax Indemnity Agreement, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of incorporation and bylaws of the Owner Participant and the Owner Participant Guarantor, certified by the Secretary or an Assistant Secretary of the Owner Participant or the Owner Participant Guarantor as of the Refunding Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Refunding Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of the Original Agreements to which it is a party, this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby, and a copy of the resolutions of the board of directors of the Owner Participant Guarantor, certified as such as of the Refunding Date by the Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant Guarantor of the Owner Participant Guaranty and the other Operative Agreements to which such Owner Participant Guarantor is or is to be a party and each other document to be executed and delivered by the Owner Participant Guarantor in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee and the Owner Trustee Guarantor, certified by the Secretary or an Assistant Secretary of the Owner Trustee or the Owner Trustee Guarantor as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing (i) the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of the Original Agreements to which it is a party, this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby and (ii) the execution, delivery and performance by the Owner Trustee Guarantor in its individual capacity or as Owner Trustee Guarantor, as the case may be, of the Original Agreements to which it is a party, the Owner Trustee Guaranty and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee Guarantor, and each other document to be executed and delivered by the Owner Trustee Guarantor in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of the Original Agreements to which it is party, this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (vi) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Refunding Date (or other like instruments satisfactory to the Lessee and the Owner Participant) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vii) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Owner Participant, the Owner Trustee Guarantor and the Owner Participant Guarantor as the Indenture Trustee, the Pass Through Trustee or the Owner Participant may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Title, Airworthiness and Registration. On the Refunding Date, the following statements shall be true, and the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received evidence from the Lessee reasonably satisfactory to each such Person to the effect that: (i) the Owner Trustee has good and marketable title to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) the Lease, the Indenture and the Trust Agreement concurrently with the Refinancing of the Original Loan Certificates have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) the Aircraft is registered in the name of the Owner Trustee. (i) Officer's Certificate of Lessee. On the Refunding Date, the following statements shall be true, and the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Refunding Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered at the closing pursuant hereto or thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1996 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (j) Officer's Certificates of Owner Participant and Owner Participant Guarantor. On the Refunding Date, the following statements shall be true, and the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from (i) the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Refunding Date, stating that: (A) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered at the closing pursuant hereto or thereto, are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (B) no Lessor's Liens attributable to the Owner Participant exist; and (C) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default; and (ii) from the Owner Participant Guarantor, signed by a duly authorized officer of such Owner Participant Guarantor dated the Refunding Date, stating that the representations and warranties of such Owner Participant Guarantor contained in its Owner Participant Guaranty and in any certificate delivered at the closing pursuant thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date). (k) Other Officer's Certificates. On the Refunding Date, the following statements shall be true, and the Lessee, the Owner Participant, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from (i) each of SSB and the Owner Trustee (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the Lessee, the Owner Participant, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Refunding Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (A) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered at the closing pursuant hereto or thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (B) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (C) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens; and (ii) from the Owner Trustee Guarantor, signed by a duly authorized officer of the Owner Trustee Guarantor dated the Refunding Date, stating that the representations and warranties of the Owner Trustee Guarantor contained in the Owner Trustee Guaranty and in any certificate delivered at the closing pursuant thereto are true and correct on and as of the Refunding Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date). (l) Legal Opinions. The Owner Participant, the Owner Participant Guarantor, the Agent, the Original Loan Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Owner Participant Guarantor, the Agent, the Original Loan Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Refunding Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Simpson, Thacher & Bartlett, special counsel for the Owner Participant and the Owner Participant Guarantor, in the form of Exhibit A(2)(a) hereto and the General Counsel's Office of the Owner Participant and the Owner Participant Guarantor, in the form of Exhibit A(2)(b) hereto, each addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(3) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Bingham Dana LLP, special counsel for the Owner Trustee and the Owner Trustee Guarantor, in the form of Exhibit A(4) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(5) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(6)(a) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(6)(b) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee; and (viii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(7) hereto and addressed to the Agent, the Original Loan Participant, the Underwriters, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee. (m) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (f) and (h) of this Section 4.01, or in connection with the purchase of the Aircraft by the Owner Trustee and the issuance of the Loan Certificates and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements then due and payable shall have been duly paid in full. (n) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (o) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (p) Cancellation. Following the Refinancing of the Original Loan Certificates, the Original Loan Certificates shall have been duly delivered by the Original Loan Participant to the Indenture Trustee for cancellation and delivery to the Owner Trustee. (q) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. Section 4.02. Opinion of Special Aviation Counsel. Promptly upon the filing and, where appropriate, recording of the documents specified in 4.01(h)(iii) hereof, pursuant to the Transportation Code the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Owner Participant Guarantor, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due recording of such documents and the documents identified in Section 4.01(i) of the Original Participation Agreement and (ii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby is subject to the conditions that, prior to or on the Refunding Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(vii), (h)(ii)-(iv), (j), (k) and (l)(ii)-(viii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Refunding Date: (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the Original Agreements to which it is a party, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered by the Lessee and constitutes the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.01(l)(viii) and 4.02 hereof and except for the filings referred to in Section 4.01(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Refunding Date or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee by appropriate proceedings that do not involve any material danger of sale, forfeiture or loss of the Aircraft or any part thereof), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the filing with and, where appropriate, recordation pursuant to the Transportation Code of the Indenture, the Trust Agreement and the Lease, (B) the filing of the financing statements referred to in Section 4.01(f) hereof and (C) the taking of possession by the Indenture Trustee of the original counterpart of the Lease and maintaining possession of the original counterpart of the Lease Supplement delivered on the Delivery Date, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Owner Trustee and the Lessee under the Original Lease, the rights of the Indenture Trustee under the Original Indenture, the beneficial interest of the Owner Participant created by the Original Trust Agreement and the interest of the Original Loan Participant created by the Original Indenture and the Indenture and Security Agreement Supplement covering the Aircraft; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Reports on Form 10-K for the fiscal years ended May 31, 1996 and May 31, 1997, its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998 and its Current Report on Form 8-K dated June 11, 1997, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Reports, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f) and 4.02 hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Refunding Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Refunding Date under Article 13 of the Lease shall have been paid by the Lessee; (q) on the Refunding Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) the Aircraft has been duly certificated by the FAA as to type and airworthiness; there is in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Refunding Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) the Aircraft is fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof; and (y) the representations and warranties of the Lessee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. The Lessee represents and warrants that neither it, nor, based on representations of First Chicago Leasing Corporation, First Chicago Leasing Corporation acting on its behalf, has taken or will take any action which would subject the issuance or sale of any interest in the Lessor's Estate or the Trust Agreement to the provisions of Section 5 of the Securities Act of 1933, as amended. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 15 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered at the Lessee's cost and expense all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Indenture, the Tax Indemnity Agreement, the Lease and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will promptly take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) The Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to remain duly registered in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that if at any time after December 31, 2005, so long as no Event of Default shall have occurred and be continuing, the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate under the laws of such jurisdiction of reregistration, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country listed in Schedule III hereto with which the United States then maintains normal diplomatic relations (and which is not then experiencing war or substantial civil unrest), the Owner Participant, the Owner Trustee and the Indenture Trustee, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, shall not unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (C) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required) and (y)(i) if such change in registration is made other than in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (D) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (E) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (F) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (G) that such change will not result in the imposition of, or increase in the amount of, any Tax (which, for this purpose, includes the loss of any tax benefits assumed by the Owner Participant to be available to it based upon the assumptions set forth in Section 2 of the Tax Indemnity Agreement) for which the Lessee has not agreed to indemnify the Owner Participant to its reasonable satisfaction, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (H) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (I) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; (J) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (K) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft and the Trust Indenture Estate, that all recordings and filings required to so perfect the Lien of the Indenture have been duly effected, and that no Liens (except Liens permitted under Section 6.01 of the Lease) shall arise by reason of such registration; and (L) that appropriate deregistration powers of attorney in favor of the Owner Trustee and the Indenture Trustee have been executed and delivered by the Lessee and any sublessee and, if necessary or desirable for the effectiveness thereof, filed with the relevant aeronautics authority; and (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might reasonably have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Trustee, the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft or under the Lease and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request; and (H) the Lien of the Indenture continues to constitute a first priority, duly perfected Lien on the Aircraft. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Refunding Date, the Lease, the Trust Agreement and the Indenture. The following documents shall be filed and, where appropriate, recorded on the Refunding Date with the Aeronautics Authority in the following order of priority: first, the Trust Agreement, second, the Indenture and third, the Lease with the Indenture attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders or the Owner Participant. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company (or Person which acquires by conveyance, transfer or lease the assets of the Lessee) is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become the Lessee hereunder in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant, the Owner Trustee and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all reports and statements furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any officer of the Lessee obtaining knowledge of any condition or event which constitutes a Default or an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Indenture Trustee and the Pass Through Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review, of the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement to which it is or is to be a party shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved] (b) Owner Participant. The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Section 7.03(d) hereof, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. Neither the Owner Participant nor anyone authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliates of any thereof whether or not such action or inaction is purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Refunding Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time on or after the Delivery Date it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time on or after the Delivery Date when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) either it shall cease to be, or an event which has been publicly disclosed has occurred of which the Owner Participant has knowledge and which will cause the Owner Participant to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee, the Owner Trustee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 20 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain or permit the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto any actual damages (but not consequential damages) suffered by any such other party to the extent the same shall result from the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Refunding Date; and (B) to the Lessee, the Indenture Trustee or the Pass Through Trustee for any damages actually (but not consequentially) incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c); provided, that, the foregoing shall not restrict the Pass Through Trustee or the Indenture Trustee from asserting against the Owner Participant any damages actually incurred by the holders of any Pass Through Certificates. Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c), but without any obligation on the part of such other party to take any action believed by it in good faith to be unreasonably burdensome to such party or materially adverse to its business interests. Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant represents and warrants on the date hereof and as of the Refunding Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware and it has full corporate power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Refunding Date will be duly executed and delivered by the Owner Participant and constitute or on the Refunding Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of the Original Agreements to which it is a party, this Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) the representations and warranties of the Owner Participant set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, including, without limitation, the airworthiness, value, condition, workmanship, design, patent or trademark infringement, operation, merchantability or fitness for use of the Aircraft, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Refunding Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Reimbursement. Without limiting any other rights the parties hereto may have as a result of any breach by the Owner Participant of its obligations in Section 7.03(b) hereof, the Owner Participant agrees to reimburse each other party hereto for all reasonable legal fees and expenses of counsel that may be incurred by any such party as a result of the failure of the Owner Participant to discharge and satisfy any such Lessor's Lien in accordance with the terms of Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. At any time after the Delivery Date, and subject to the conditions set forth in this Section 7.03(d), the Owner Participant may assign, convey or otherwise transfer to a single institutional investor or an Affiliate of an institutional investor all (but not less than all) of the Beneficial Interest, provided that it gives the Lessee and the Indenture Trustee at least 10 Business Days' notice of such assignment, conveyance or other transfer and provided further that the Owner Participant and any Owner Participant Guarantor shall remain liable for all obligations of the Owner Participant under the Trust Agreement and the Operative Agreements to which the Owner Participant is a party to the extent (but only to the extent) relating to the period on or before the date of such transfer and provided that the transferee agrees by a written instrument substantially in the form attached hereto as Exhibit E-1 to assume primary liability for all obligations as an Owner Participant under the Trust Agreement and the other Operative Agreements to which such Owner Participant is a party relating to the period after the date of transfer. Any such transferee shall (a) be (i) a bank, savings institution, finance company, leasing company or trust company, national banking association acting for its own account or in a fiduciary capacity as trustee or agent under any pension, retirement, profit sharing or similar trust or fund, insurance company, fraternal benefit society or corporation acting for its own account having a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent) of not less than $75,000,000, (ii) a subsidiary of any Person described in clause (i) where such Person provides (A) support for the obligations assumed by such transferee subsidiary reasonably satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee or (B) an unconditional guaranty substantially in the form of Exhibit E-2 attached hereto of such transferee subsidiary's obligations, or (iii) an Affiliate of the transferring Owner Participant, so long as such Affiliate has a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent) of not less than $75,000,000, (b) be legally capable of binding itself to the obligations of the Owner Participant and shall expressly agree to assume all obligations of the Owner Participant under the Trust Agreement and this Agreement and (c) provide representations substantially similar to those contained in Sections 7.02(a) and 7.03(a) hereof. In the event of any such assignment, conveyance or transfer, the transferee shall become a party to the Trust Agreement and shall agree to be bound by all the terms of and will undertake all of the obligations of the Owner Participant contained in the Trust Agreement and the other Operative Agreements in the manner set forth in the form attached as Exhibit E-1. A transferee hereunder shall be (i) a "U.S. Person" as defined in Section 7701(a)(30) of the Code (or any successor provision thereto) and such transferee shall be personally liable for any debt service to the extent that its receipt of rentals is reduced by reason of any withholding Taxes that result from such transferee's failure to be such a "U.S. Person" and (ii) a Citizen of the United States or has established a voting trust, voting powers or other arrangement reasonably satisfactory to the Indenture Trustee and the Lessee to permit the Owner Trustee to be the registered owner of the Aircraft under the Transportation Code. A transferee hereunder shall not be, and in acquiring the Beneficial Interest shall not use the assets of, an employee benefit plan subject to Title I of ERISA or an individual retirement account or a plan subject to Section 4975 of the Code. Assuming the truth of the representations made in Section 6.01(m) hereof and compliance with Section 10.06 of the Indenture, no such assignment, conveyance or transfer shall violate any provision of law or regulation or create a relationship which would be in violation thereof. The Owner Trustee shall not be on notice of or otherwise bound by any such assignment, conveyance or transfer unless and until it shall have received an executed counterpart of the instrument of such assignment, conveyance or transfer. Upon any such disposition by the Owner Participant to a transferee as above provided, the transferee shall be deemed the "Owner Participant" or "Trustor" for all purposes of the Operative Agreements, and shall be deemed to have made all the payments previously made by its transferor and to have acquired the same interest in the Lessor's Estate as theretofore held by its transferor; and each reference therein to the "Owner Participant" or "Trustor" shall thereafter be deemed a reference to such transferee. Notwithstanding anything to the contrary contained in this Section 7.03(d), in no event shall the Owner Participant transfer its interest in the Beneficial Interest to any entity whose business is that of a nationwide or worldwide overnight or expedited delivery small package air courier, cargo or freight deliverer or which competes with the Lessee in such lines of business. The Lessee agrees that it will reasonably cooperate with the Owner Participant in effecting an assignment of the Owner Participant's interests including, without limitation, providing letters to any successor Owner Participant permitting such successor Owner Participant to rely on any opinions provided by the Lessee on the Delivery Date. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Refunding Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform the Original Agreements to which it is a party, this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of the Original Agreements to which it is a party, this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, and each of the Original Agreements to which it is a party does, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, and each of the Original Agreements to which it is a party does, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Original Agreements and the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; (vii) on the Refunding Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA on the Delivery Date, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States; and (viii) the representations and warranties of the Owner Trustee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Refunding Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Refunding Date 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 and has the power and authority to enter into and perform its obligations under the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party and to authenticate the Certificates to be delivered on the Refunding Date; (ii) the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Refunding Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Original Agreements to which it is a party, this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; (v) on the Refunding Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and each Ancillary Agreement; and (vi) the representations and warranties of the Indenture Trustee set forth in the Original Agreements to which it is a party were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such warranties and representations were correct on and as of such earlier date). (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Refunding Date. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default or Event of Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release upon written notice from the Lessee to make such request. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be). Section 7.09. Original Loan Participant's and Pass Through Trustee's Representations and Warranties. (a) The Original Loan Participant represents and warrants that the representations and warranties made by it in Sections 7.01(a) and 7.06 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent such representations expressly related solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date). (b) The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date and as of the Refunding Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Indenture Trustee (in its individual or trust capacity) and the Subordination Agent (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D) or (E) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens attributable to the Owner Trustee) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D) or (E) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, then the Lessee shall so notify the Indenture Trustee (such notice to be given at least 30 and not more than 60 days prior to the effective date of such assumption), and each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture, this Agreement and the other Operative Agreements, except any obligations relating to the period prior to such assumption and take all such other actions, at the Lessee's expense, as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Delivery Date with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Owner Participant in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any other provision of the Trust Agreement in a manner that would materially adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee. If and so long as the Indenture shall not have been discharged the consent of the Indenture Trustee shall also be required prior to any termination or revocation of such trust and in addition, the Owner Participant will, at the Lessee's expense, promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed or asserted (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part or the Lessor's Estate, the Trust Indenture Estate, Rent, the Certificates or otherwise upon or with respect to any Operative Agreement or Original Agreement, any payments thereunder or otherwise in connection therewith), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority relating to or measured by: (i) the construction, mortgaging, financing, refinancing, purchase, acceptance, rejection, delivery, nondelivery, transport, location, ownership, registration, reregistration, deregistration, insuring, assembly, possession, repossession, operation, use, non-use, condition, maintenance, repair, improvement, conversion, sale, return, abandonment, preparation, installation, storage, redelivery, replacement, manufacture, leasing, subleasing, sub-subleasing, modification, alteration, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of, or the imposition of any Lien (or the incurrence of any liability to refund or pay over any amount as a result of any Lien) on, the Aircraft, the Airframe, any Engine or any Part or any interest therein; (ii) amounts payable under the Operative Agreements or Original Agreements; (iii) the Property, or the income or other proceeds received with respect to the Property attributable to the transactions contemplated by the Operative Agreements or the Original Agreements, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (iv) otherwise with respect to any Operative Agreement or Original Agreement, any interest therein or by reason of the transactions described in or contemplated by the Operative Agreements or the Original Agreements; (v) the principal or interest or other amounts payable with respect to the Original Loan Certificates, the Pass Through Certificates or the Certificates; (vi) the Original Loan Certificates, the Pass Through Certificates or the Certificates or the issuance, sale, acquisition, reoptimization, or refinancing thereof or the beneficial interests in the Trust Estate or the Trust Indenture Estate or the creation thereof under the Trust Agreement or the Indenture, or the security interest created or perfected thereby or by any filing thereof; (vii) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture; (viii) the Aircraft, the Airframe, any Engine or any Part; or (ix) the rentals (including Basic Rent, Renewal Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or the Original Agreements. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee other than an Original Loan Participant, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value-added taxes, capital, franchise, net worth (whether denominated income, excise, capital stock, or doing business taxes) or other similarly-based taxes (other than sales, use, transfer, rental, ad valorem, stamp, property, or similar taxes) ("Income Taxes"), provided, however, that this clause (i) shall not exclude from the indemnity described in Section 8.01(a) above any such Income Taxes to the extent such taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such taxes but for, or would be subject to such taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that (A) any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes and (B) this sentence would require indemnification in a jurisdiction in which the Indemnitee is already subject to an Income Tax (an "Existing Income Tax") only if an event set forth in Clause (x) or (y) of this sentence causes the Indemnitee to be subject to an Income Tax in that jurisdiction (a "New Income Tax") other than an Existing Income Tax, and such New Income Tax would have been imposed even if the activities contemplated by the Operative Agreements or the Original Agreements were the Indemnitee's sole nexus to the jurisdiction); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements or the Original Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) With respect to an Original Loan Participant, Income Taxes except to the extent such Income Tax is imposed (including by way of increase) (A) on or with respect to any gain resulting from the assumption of any Certificate by the Lessee, (B) as a result of the operation, registration, location, presence, basing or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction (it being understood that (I) the incremental Income Taxes described in this clause (B) shall not include any U.S. Federal income taxes and (II) that to the extent such incremental Income Taxes give rise to any incremental current Tax benefit in another tax jurisdiction, that such incremental benefit shall offset and decrease the incremental Income Taxes determined under this clause (B)) or (C) solely as a result of the place of incorporation, principal office, corporate domicile or the activities of the Lessor, the Owner Participant, the Owner Trustee, the Indenture Trustee, the Lessee or any sublessee in such jurisdiction (it being understood that to the extent that any Income Taxes described under this clause (C) give rise to any incremental current Tax benefit in another tax jurisdiction or another tax period, that such incremental Tax benefit shall offset and decrease the Income Taxes determined under this clause (C)); provided, however, that the provisions of this paragraph (b)(ii) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02 of this Agreement; (iii) Taxes imposed with respect to the Aircraft and arising out of or measured by acts, omissions, events or periods (or any combination of the foregoing) which occur after the later of (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Original Loan Certificates in the case of an Original Loan Participant, the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, provided that this exclusion (iii) shall not apply in respect of any payment made after the dates set forth in clauses (A) and (B) above unless such payment is made with respect to any event or circumstance occurring on, with or prior to such return or transfer or period prior to such return or transfer, or Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Original Trust Agreement or the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Original Indenture or the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements or the Original Agreements) or the breach by such Indemnitee of: (i) in the case of an Indemnitee other than the Owner Participant, any representation, warranty or covenant contained in the Operative Agreements or the Original Agreements or any document delivered in connection therewith and (ii) in the case of the Owner Participant, the representations or covenants in Sections 7.02(a), (c); 7.03(a)(i), (ii), (iii), (iv), (vii), (ix); and 7.03(b), (c), (d), (e) of the Original Participation Agreement or this Agreement (in either case unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on, and not collected by withholding from payments of Rent, the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate (not including any transfers of any Certificates pursuant to Section 15.01(a) hereof) or a disposition in connection with a bankruptcy or similar proceedings involving either the Lessor or the Owner Participant other than (A) transfers resulting from a loss, substitution or modification of the Aircraft, Engines or any Part, (B) any transfer of the Aircraft, Engines or any Part (in each case other than at Fair Market Value) to the Lessee or other person in possession thereof, (C) transfers attributable to an Event of Default or (D) a transfer pursuant to the Lessee's exercise of its rights under Section 10.01 of the Lease; the parties agree to cooperate to minimize any such Taxes covered by this provision; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Taxes imposed on a successor, assign or other transferee of the Owner Participant or the Owner Trustee that is not a U.S. Person or of any other Indemnitee under the Original Agreements or an Indemnitee as of the date hereof under the Operative Agreements (including, without limitation, a transferee which is a new lending office of an original Indemnitee) which on the Delivery Date is an Indemnitee (for purposes of this clause (viii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed (in the case of an Original Loan Participant, immediately after giving effect to such succession, assignment or other transfer) and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it), provided, however, that the exclusion provided by this clause (viii) shall not apply in the case of a succession, transfer or disposition (A) that occurs after the Lease has been declared in default or if such transfer or disposition is pursuant to the exercise of remedies under Article 17 of the Lease, (B) which is an actual or deemed transfer pursuant to Section 7.11 hereof or as a consequence of a Refinancing under Section 15.01 hereof, or any actual or deemed transfer of an Original Loan Certificate that as part of a Refinancing under Section 15.01 hereof is not retired, but only to the extent the Taxes attributable to such transfer exceed the amount of Taxes that would have been imposed on such transferor if the debt had instead been retired, (C) to the extent necessary to make payments with respect to such Taxes on an After-Tax Basis, (D) to the extent such Taxes are directly attributable to the failure of the Lessee to take administrative actions as have been reasonably requested of it in writing in a timely manner and which will result in no after-tax cost or expense to the Lessee or (E) in the case of the Owner Participant or the Lessor, to any Tax other than an Income Tax; (ix) [Reserved]; (x) Any Taxes which have been included in the Purchase Price and which have been paid to the applicable taxing authorities; (xi) Any Taxes which would not have been imposed but for a Lessor's Lien or an Indenture Trustee's Lien; and (xii) Any Taxes imposed on the Owner Participant arising under or in connection with any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code ("Prohibited Transaction"); provided, however, that in the event any prohibited transaction arises which is not exempt under any class prohibited transaction exemption or any individual or statutory prohibited transaction exemption (individually or collectively, a "PTE") then the indemnity provided for herein shall extend to any Taxes incurred by the Owner Participant (or any Affiliate thereof) as the result of any Prohibited Transaction arising out of the purchase or holding of any Loan Certificates by an employee benefit plan subject to Title I of ERISA or by a plan subject to Section 4975 of the Code (individually or collectively, an "ERISA Plan") with respect to which the Owner Participant is a party in interest, within the meaning of Section 3(14) of ERISA, or a disqualified person,within the meaning of Section 4975 of the Code, except, however, that such Indemnity shall not extend to any Taxes incurred by the Owner Participant (or any Affiliate thereof) as the result of any Prohibited Transaction occurring with respect to the purchase or holding of any Loan Certificates (A) over which purchase or holding the Owner Participant (or an Affiliate thereof) has discretion or control (other than in the capacity of a custodian, directed trustee or other similar nondiscretionary capacity), or (B) by an ERISA Plan with respect to which the Owner Participant (or any Affiliate thereof) is a "plan sponsor" within the meaning of Section 3(16)(B) of ERISA. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred, provided that the calculation of any additional amounts owing to any Indemnitee as a result of the Lessee's obligation to indemnify on an After-Tax Basis shall be made without regard to the exclusions set forth in Section 8.01(b). If any Indemnitee actually realizes a tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee, to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such tax benefit plus any other tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under Section 8.01 hereof and this Section 8.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Sections 8.01 and 8.05 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments to such Indemnitee pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee (and without regard to Section 8.01(b) hereof, except for clause (v) thereof) for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is subsequently disallowed or reduced (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid promptly, but in any event within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable within 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly (but in any event within 30 days of receipt thereof) give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any written requests for information sent to such Indemnitee (and not the Lessee) from any taxing authority to the extent relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder and with respect to which it would be necessary or beneficial to have information provided by the Lessee; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice or copy. The Lessee may, at its option, contest in its own name or, if required by law, require the Indemnitee to contest in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. Notwithstanding the foregoing, the Lessee shall not be permitted or entitled to contest any such Tax in its own name unless the Tax is reflected in a report or a return of the Lessee or raised in an audit or other proceeding of the Lessee and the Lessee is allowed to directly contest such Tax under applicable law of the taxing jurisdiction provided, that if the Lessee is so permitted under applicable law to contest a Tax asserted against the Lessee and the same or similar Tax is also asserted against the Indemnitee, each of the Lessee and such Indemnitee shall conduct its contest in its own name and the Lessee and such Indemnitee will cooperate in a reasonable manner with respect to the respective contests of such Tax. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall control the contest and shall determine the manner in which to contest such Taxes and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that the Lessee shall have the right to be consulted in good faith with respect to any contest of claims subject to indemnification hereunder, including governmental and judicial conferences and the right to be consulted in good faith regarding the relevant portions of all related submissions to any governmental or other authority, provided, however, that the Lessee shall be permitted to participate in any such contest only (x) with respect to issues that can be separated on audit from any Taxes for which the Lessee is not required to indemnify the Indemnitee hereunder, and (y) if the Indemnitee shall have determined that in its judgment, exercised in its sole discretion, neither such participation nor the separation of issues will adversely affect the Indemnitee. The Indemnitee will not settle a contest that results in a final determination without consent of the Lessee, unless the Indemnitee waives its right to indemnification with respect to such contest and any related contest. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on a current basis and on an After-Tax Basis the after-tax cost of all reasonable fees and expenses (including reasonable attorneys' fees and accountants' fees) which such Indemnitee may incur as a result of contesting such Taxes, (ii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements and (iii) acknowledged in writing the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful, unless it is reasonably clear from the resolution of the contest that an exclusion set forth in Section 8.01(b) hereof applies. In no event shall such Indemnitee be required or the Lessee be permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received, at the Lessee's expense, an opinion of its tax counsel, such counsel to be reasonably satisfactory to the Lessee ("Tax Counsel"), to the effect that there exists a reasonable basis for contesting such claim, (ii) such Indemnitee (and, if such Indemnitee is not the Owner Participant, the Owner Participant and such Indemnitee) shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if a Payment Default, Bankruptcy Default or an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance, (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel to the effect that the applicable circumstances or law has changed and that in light thereof, there is substantial authority for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee exceeds $50,000; provided, that in the event that such Indemnitee is not required under this paragraph to contest any Tax liability for which the Lessee is obligated to indemnify any Indemnitee, the Lessee may contest such Tax liability in the name of the Lessee, if permitted by law. The Lessee may appeal or require the Indemnitee to appeal any judicial decision provided the foregoing requirements of this Section 8.04 are met and the Indemnitee shall have received, at the Lessee's expense, an opinion of Tax Counsel, to the effect that there is substantial authority for such appeal. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Payment Default, Bankruptcy Default or Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Payment Default, Bankruptcy Default or Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) any expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any Taxes against which the Lessee is or may be obligated to indemnify the Indemnitees under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns or other confidential information. The Lessee shall hold the Indemnitee harmless on an After-Tax Basis from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto to the extent legally entitled to do so in its own name; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or Owner Participant is the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease or the Tax Indemnity Agreement and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. To the extent the Lessee is required to pay or withhold any Tax imposed on or with respect to an Indemnitee in respect of the transactions contemplated by the Operative Agreements, which Tax is not otherwise the responsibility of the Lessee under the Operative Agreements, or any other written agreements between the Lessee and such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, disbursements and expenses (including legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements and the Original Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature, including without limitation Make-Whole Premium (unless excluded pursuant to Section 3.03 of the Lease) (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) the Original Agreements, this Agreement, the Lease, the Indenture, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Pass Through Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements or the Original Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements or the Original Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the enforcement of the terms of the Operative Agreements or the Original Agreements and the administration of the Trust Indenture Estate; and (vi) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate or any Original Loan Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or the Original Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement or the Original Trust Agreement and the Lessor's Estate, the Indenture or the Original Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Original Participation Agreement, the Indenture, the Original Indenture, the Indenture and Security Agreement Supplement, the Trust Agreement or the Original Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement or the Original Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in or holding of any Lien on the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements and the Original Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term (unless the Aircraft is being returned at such time, in which case after return of physical possession; provided that if the Lessor has terminated the Lease pursuant to Article 17 thereof, the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor shall be exercising remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease (subject to the foregoing proviso if the Lessor has terminated the Lease pursuant to Article 17 of the Lease) but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease, the other Operative Agreements or the Original Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly pursuant to the terms of this Agreement or any other Operative Agreement; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement, the Original Agreements or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default by the Lessee of any of its obligations under the Operative Agreements or by another Indemnitee of any of the foregoing; (vi) [reserved]; (vii) is, in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; in the case of SSB, Lessor's Liens to the extent attributable to SSB; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is, in the case of the Owner Participant or the Owner Trustee, attributable to the offer or sale by such Indemnitee after the Delivery Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (x) in connection with a Refinancing, (y) as a result of the occurrence of an Event of Default provided that either the Lease has been declared in default or the transfer is pursuant to the exercise of remedies under Article 17 of the Lease or (z) in connection with the Lessee's exercise of its early termination option under Article 10 of the Lease or its purchase options under Article 4 of the Lease or in connection with Article 11 of the Lease; and (ix) is an Expense arising under or in connection with any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code ("Prohibited Transaction"); provided, however, that in the event any prohibited transaction arises which is not exempt under any class prohibited transaction exemption or any individual or statutory prohibited transaction exemption (individually or collectively, a "PTE") then the indemnity provided for herein shall extend to any Expenses incurred by the Owner Participant (or any Affiliate thereof) as the result of any Prohibited Transaction arising out of the purchase or holding of any Certificates by an employee benefit plan subject to Title I of ERISA or by a plan subject to Section 4975 of the Code (individually or collectively, an "ERISA Plan") with respect to which the Owner Participant is a party in interest, within the meaning of Section 3(14) of ERISA, or a disqualified person,within the meaning of Section 4975 of the Code, except, however, that such Indemnity shall not extend to any Expenses incurred by the Owner Participant (or any Affiliate thereof) as the result of any Prohibited Transaction occurring with respect to the purchase or holding of any Certificates (A) over which purchase or holding the Owner Participant (or an Affiliate thereof) has discretion or control (other than in the capacity of a custodian, directed trustee or other similar nondiscretionary capacity), or (B) by an ERISA Plan with respect to which the Owner Participant (or any Affiliate thereof) is a "plan sponsor" within the meaning of Section 3(16)(B) of ERISA. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement, the Original Agreements and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments to such Indemnitee pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has received notice for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be, but without regard to Section 8.01(b) hereof, other than Section 8.01(b)(v) hereof. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Payment Default or Event of Default shall have occurred and be continuing or shall arise at any time during the claim and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any such claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent (A) such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or on the grounds that such proceeding involves the potential imposition of criminal liability on such Indemnitee or (B) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien on the Aircraft or the Trust Estate (unless the Lessee posts a bond or other security reasonably acceptable in form and substance to such Indemnitee) or involve any material risk of civil liability to such Indemnitee for which it is not indemnified hereunder. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, to the extent that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. The Lessee shall not enter into any settlement or compromise which the Lessee has not agreed to discharge or with respect to which the Lessee has not agreed to indemnify such Indemnitee to such Indemnitee's satisfaction or which admits any criminal violation, gross negligence or willful misconduct on the part of any Indemnitee without the prior written consent of such Indemnitee. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities after the expiration or other termination of the Lease, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to such termination or expiration or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. The Owner Participant shall (as soon as practicable upon receipt of appropriate bills or invoices) furnish the Owner Trustee funds in an amount equal to the amount of the Transaction Costs for which the Owner Trustee is liable pursuant to this Section 10.01. The Owner Trustee shall pay (or reimburse the Lessee if the Lessee shall have previously made such payment), in addition to those items set forth in Section 10.01(a) of the Original Participation Agreement (other than clause (vii) thereof) all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the Original Loan Participant and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent and the Indenture Trustee; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses (including computer time-sharing charges) of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Participant Guarantor, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the Original Loan Participant and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant or the refunding of the Original Loan Certificates, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant or the refunding of the Original Loan Certificates, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4896969697% of the Purchase Price (the "Estimated Expense Amount"). (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Owner Participant Guarantor, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents (whether or not consummated), including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under the Original Agreements, this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement (including any adjustment pursuant to Section 3.04 of the Lease) or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Section 7.03(d) hereof or otherwise) by the Owner Participant after the Refunding Date of any interest in the Aircraft, the Lessor's Estate, the Beneficial Interest or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) after the Lease has been declared in default or if the transfer is pursuant to the exercise of remedies under Article 17 of the Lease or (B) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02, Article 10 or Article 11 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance reasonably satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Indenture, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, any Original Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal, any Make-Whole Premium and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of the terms of the Indenture, the Intercreditor Agreement or the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. No Retroactive Application. This Agreement, the Lease, the Indenture, the Ancillary Agreement I and the Trust Agreement each amend and restate, and the Tax Indemnity Agreement amends, the respective original agreements with no intention of retroactive application. The applicable original agreements have been restated for the convenience of the parties and such amendments and restatements, and such amendment in the case of the Tax Indemnity Agreement, are not intended to waive or modify the obligations of any party which accrued or were to have been performed on or prior to the Refunding Date under such unamended agreements (or, in the case of this Agreement, the effective date hereof) or to deprive any party of its rights and remedies in respect thereof. Section 13.04. Pass Through Trustee's and Subordination Agent's Acknowledgement. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Owner Participant, to its office at 200 First Stamford Place, Stamford, Connecticut 06902, Attention: Vice President Leasing with a copy to Director, Portfolio Administration, telephone (914) 335-5000, facsimile 914 335-8301, or to such other address as the Owner Participant may from time to time designate in writing to the Lessee and the Indenture Trustee; (d) If to the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee, Pass Through Trustee or the Subordination Agent, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING/REOPTIMIZATION Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings (including the refinancing contemplated by this Agreement on the Refunding Date) in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"). Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as the Owner Participant is satisfied there is no foreign currency risk to it), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the prior written consent of the Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant in a manner satisfactory to it for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant and the Indenture Trustee shall have received at least 15 days' prior written notice (three (3) Business Days with respect to the refinancing contemplated by this Agreement on the Refunding Date) of the scheduled closing date of such Refinancing and the Owner Participant shall have been provided such longer period as it shall have required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant, nor shall its rights against all other parties taken as a whole be adversely affected compared to such rights in effect under the Operative Agreements prior to such proposed Refinancing. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent and setting forth Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction. (d) Without the prior written consent of the Owner Participant, which consent may be withheld in its sole discretion, no such refinancing shall (1) cause the aggregate principal amount of the indebtedness to be substituted for the Certificates to exceed the aggregate principal amount of the then outstanding Certificates, (2) with the exception of the refinancing contemplated by this Agreement on the Refunding Date, cause the weighted average life of such indebtedness to be different by more than 6 months than the remaining weighted average life of the then outstanding Certificates, or (3) cause the date of maturity of such indebtedness to be later than the date of maturity of the Certificates being refinanced. (e) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and Breakage Costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to such Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any Breakage Costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; (viii) In the event the Lessee shall not prohibit the purchase of the Refinancing loan certificates (or pass through certificates, if the placement is in the form of pass through certificates), by, or with the assets of, an employee benefit plan, as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or a plan or individual retirement account, which is subject to Section 4975(c) of the Code, (individually or collectively, an "ERISA Plan"), the Lessee will permit the placement of the Refinancing loan certificates or pass through certificates, as the case may be, with an ERISA Plan only if purchasers of the Refinancing loan certificates or holders of pass through certificate holders, as the case may be, provide a representation (which may be in the form of a deemed representation) regarding their source of funds used in acquiring the Refinancing loan certificates or pass through certificates, as the case may be, and, if such purchasers or holders represent that they are using funds of an ERISA Plan in acquiring the Refinancing loan certificates or pass through certificates, as the case may be, such purchasers further represent that (1) either they are relying on a prohibited transaction exemption from the U.S. Department of Labor with respect to their purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, and they provide representations regarding the satisfaction of the relevant conditions of such an exemption or (2) their purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. The reliance on any such exemption will not be conditional on the Owner Participant's representation concerning its party in interest or other status with respect to ERISA Plans. If the exemption referred to in this paragraph (viii) is not valid or applicable in any respect to the purchase and holding of the Refinancing loan certificates or pass through certificates, as the case may be, or if the representation in this paragraph (viii) that such purchase and holding will not constitute a non-exempt prohibited transaction is not correct, whichever is applicable, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses resulting from any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the placement of the Refinancing loan certificates with, or the holding of the Refinancing loan certificates by, any ERISA Plan with respect to which the Owner Participant is a party in interest, within the meaning of Section 3(14) of ERISA, or a disqualified person, within the meaning of Section 4975 of the Code, provided, however, that if the Lessee shall fail to obtain the representations set forth in this paragraph (viii), such indemnity shall not be subject to the exceptions set forth under Sections 8.01(b)(xii) and 9.01(b)(ix) hereof; and (ix) The Lessee shall pay all costs and expenses (including legal fees) incurred in connection with any proposed or actually consummated Refinancing. Section 15.02. Reoptimization. (a) If a Change in Tax Rate occurs prior to the end of the Basic Term, then, subject to the terms and conditions of this Section 15.02 and Section 3.04 of the Lease, the Owner Participant may, upon 30 days' prior notice to the Lessee, the Indenture Trustee, the Owner Trustee and the Holders, elect to modify the schedule of payments of principal of the certificates issued ("Refinancing Certificates") in connection with any Refinancing effected after the Refunding Date using private debt (not including debt issued pursuant to an exemption from registration under the Securities Act relying on Rule 144A promulgated thereunder but otherwise marketed in a manner substantially similar to securities registered under the Securities Act, and not including debt issued in connection with any offering of securities registered under the Securities Act) due on each remaining Rent Payment Date on or commencing on the Rent Payment Date next succeeding the date mutually agreed to by the Owner Participant, the Lessee and the Indenture Trustee on which the Owner Participant shall make such modification (the "Reoptimization Date"). Promptly after making such modification, the Owner Participant shall furnish each party hereto written notice of the amounts so recalculated. (b) Adjustments to Refinancing Certificates. On the Reoptimization Date, subject to the satisfaction on or before the Reoptimization Date of the conditions set forth in Section 15.02(c), the Owner Trustee will issue and deliver and the Indenture Trustee will authenticate, and each holder of a Refinancing Certificate will accept delivery of, a new Refinancing Certificate or Refinancing Certificates (in replacement of each Refinancing Certificate then held by such holder, which Refinancing Certificates shall be surrendered to the Indenture Trustee for cancellation) containing such changed principal installments (expressed as a percentage of the original principal amount of such Refinancing Certificate) as shall have been recalculated by the Owner Participant, but in the same principal amount as, and containing terms identical to, except as otherwise contemplated by Section 15.02(d) hereof, the Refinancing Certificates originally issued in connection with the Operative Agreements. (c) Conditions to the Obligations of the Holders of the Refinancing Certificates on the Reoptimization Date. The obligation of each holder of a Refinancing Certificate to accept delivery of a new Refinancing Certificate on the Reoptimization Date, and to surrender on such Reoptimization Date any Refinancing Certificate then held by it, is subject to the following conditions precedent having been satisfied on or before the Reoptimization Date: (i) the requirements of Section 15.02(d) hereof shall have been satisfied; (ii) the following documents, in form and substance satisfactory to such Holder, shall have been duly authorized, executed and delivered by the party or parties thereto and shall be in full force and effect: (A) if the payments of Basic Rent, Stipulated Loss Values and Termination Values with respect to the Term have been changed, an amendment to the Lease, dated the Reoptimization Date, (B) an amendment to the Indenture setting forth any changed repayment schedule to the Refinancing Certificates, dated the Reoptimization Date and duly filed (or in the process of being so duly filed) for recordation with the Aeronautics Authority and (C) replacement Refinancing Certificates; and (iii) in connection with any Reoptimization the Owner Participant shall pay or agree to pay all reasonable costs and expenses incurred by the Lessee, the Owner Trustee, the Indenture Trustee and each Holder of a Refinancing Certificate (including, without limitation, reasonable legal fees and expenses) in connection with any such reoptimization. (d) Payment Schedules. Except as otherwise provided in this Section 15.02 as long as the Refinancing Certificates remain outstanding, the payment schedules for the Refinancing Certificates shall not be modified. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. Owner for Federal Tax Purposes. It is hereby agreed between the Owner Participant and the Lessee (but the Lessee makes no representation to such effect) that it is the intent of the parties for Federal, state, local and foreign income tax purposes that the Owner Participant will be treated as the owner of the Aircraft and the Lessee will be treated as the lessee of the Aircraft. Section 17.02. [Reserved]. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to and executed by the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement other than the Original Loan Participant. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed) under the Trust Agreement, the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Subordination Agent and its successors and permitted assigns, including without limitation each Holder of a Certificate, and the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed). Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Participant or the Owner Trustee becomes, or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners or similar regulatory authorities, auditors or accountants, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to an Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) or other transferee so long as such assignee or participant (or prospective assignee or participant) or other transferee first executes and delivers to the respective party making such assignment or participation an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this _____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER PARTICIPANT: PMCC LEASING CORPORATION By:__________________________________________ Name: Joan D. Woodroof Title: Director, Structured Finance, Philip Morris Capital Corporation OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:_____________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President ORIGINAL LOAN PARTICIPANT: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent and as Original Loan Participant By:__________________________________________ Name: Title: SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N675FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2018 Principal Amount: $33,630,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N675FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2016 Principal Amount: $12,611,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N675FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2014 Principal Amount: $16,816,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment to be received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment to be received. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreement II. The Ancillary Agreement II (Federal Express Corporation Trust No. N675FE), dated the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Assignment and Assumption Agreement. Any agreement delivered in compliance with Section 7.03(d) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 18, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Stamford, Connecticut, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. June 18, 1998. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(xii) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 60 days due to theft or disappearance or such longer period, not to exceed 180 days from the end of such initial 60-day period, if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such theft or disappearance constitutes an Event of Loss pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twenty-four (24) consecutive months or until the end of the Term, if earlier. The date of such Event of Loss shall be (s) the 61st day or the 241st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term or the Lessee's abandonment of diligent efforts to recover such property, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 12 month or 24 month period, referred to in clause (iv) above (or if earlier, the end of the Term or abandonment of the Lessee's efforts to restore the normal use of the Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity, expense, reimbursement or other payments paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any other Operative Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with Section 13.05 of the Lease but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any purchase price paid to the Owner Participant for its interest in the Trust Estate pursuant to Section 7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vi) above and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (v) and (vii) above (except with respect to interest attributable to payments referred to in clause (vi) above). Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming the Aircraft (or other property) is unencumbered by the Lease. In such determination, except for purposes of Section 17.01 of the Lease (when it shall be determined based upon the actual condition and location of the Aircraft), it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. French Pledge Agreement. The French Pledge Agreement dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity in respect of which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant, the Original Loan Participants or any other Holder or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to the Original Loan Participants or any other Holder, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof and which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which are severable from the Aircraft in accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of the Lease and the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, any Assignment and Assumption Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on June 18, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27401. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27402. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on June 18, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessee and the Owner Participant as it was originally executed on June 18, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on June 18, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Philip Morris Capital Corporation, a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 7.03(d) of the Participation Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages, as the case may be, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement II. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Regulatory Change. Any change after June 18, 1998 in Federal, state or foreign law or regulations or the adoption or making after such date of any interpretation, directive or request applying to a class of financial institutions including any Certificate Holder of or under any Federal, state or foreign law or regulation (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 18, 2021 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of equal or greater value, airworthiness, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Department, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Stipulated Loss Value is to be calculated with reference to any such date; provided that if amounts in respect of Stipulated Loss Value are payable under the Operative Agreements after the Stipulated Loss Determination Date in respect of which such Stipulated Loss Value was determined, the Lessor shall be compensated during the period from the Stipulated Loss Determination Date to such payment date in accordance with the provisions of the Operative Agreements. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, FPO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the seventh anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Termination Value is to be calculated with reference to any such date; provided that if amounts in respect of Termination Value are payable under the Operative Agreements after the Termination Date in respect of which such Termination Value was determined, the Lessor shall be compensated during the period from the Termination Date to such payment date in accordance with the provisions of the Operative Agreements. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Netherlands Austria New Zealand Belgium Norway Canada Philippines Denmark Portugal Finland Republic of China (Taiwan) France Singapore Germany Sweden Greece Switzerland Iceland Thailand Ireland United Kingdom Japan Luxembourg EXHIBIT A(1)(a) [Letterhead of Federal Express] [Refunding Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee, PMCC Leasing Corporation, as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(l)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the refinancing in full of the Original Loan Certificates evidencing the Original Loan Participants' participation in the payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Refunding Date and which were or shall have been accomplished on or prior to the Refunding Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the filing and, where appropriate, recording, pursuant to the Transportation Code of the Lease, the Indenture, the Trust Agreement, the filing of the financing statements referred to in Section 4.01(f) of the Participation Agreement and the taking of possession by the Indenture Trustee of the original counterpart of the Lease and maintaining possession of the original counterpart of the Lease Supplement delivered on the Delivery Date, no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the Delivery Date the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. Pursuant to the Original Participation Agreement the Aircraft was duly delivered to the Owner Trustee. Federal, as Lessee, duly accepted the Aircraft under the Original Lease and the Lease Supplement and the Term commenced on the Delivery Date. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. I rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. I hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b) [Letterhead of Davis Polk & Wardwell] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee, PMCC Leasing Corporation, as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(l)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. Pursuant to the Original Participation Agreement, the Owner Participant and the Original Loan Participant participated in the payment of the Purchase Price of one Airbus A300F4-605R Aircraft which was purchased by the Owner Trustee pursuant to AVSA's FAA Bill of Sale and AVSA's Warranty Bill of Sale, subjected to the Lien of the Original Indenture and leased to Federal Express under the Original Lease. The Participation Agreement provides, among other things, for the refinancing of the Original Loan Certificates using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. The Lease creates a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) the Lease (with the Indenture attached as an exhibit), (B) the Indenture and (C) the Trust Agreement. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) that the Original Loan Certificate is delivered by the Original Loan Participant to the Indenture Trustee for cancellation and is cancelled, (vi) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vii) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Original Indenture created, and the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that they purport to create; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Participation Agreement, the Trust Agreement, the Indenture and the Lease by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statements referred to in Section 4.01(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. (e) We rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(2)(a) [Letterhead of Simpson Thacher & Bartlett] [Refunding Date] To Each of the Addressees Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have acted as special New York counsel for PMCC Leasing Corporation ("PMCC Leasing") and Philip Morris Capital Corporation ("PMCC") in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as lessee, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as owner trustee, PMCC Leasing, as owner participant, First Security Bank, National Association, not in its individual capacity, but solely as indenture trustee, First Security Bank, National Association, not in its individual capacity, but solely as pass through trustee, First Security Bank, National Association, not in its individual capacity, but solely as subordination agent, and Morgan Guaranty Trust Company of New York, as loan participant. This opinion is being furnished to you pursuant to Section 4.01(l)(iii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Participation Agreement. We have examined executed counterparts of the Participation Agreement, Amendment No. 1 to the Tax Indemnity Agreement, Trust Agreement, Ancillary Agreement I and Ancillary Agreement II (collectively, the "Owner Participant Documents") and the Owner Participant Guaranty and we have made such other and further investigations as we have deemed necessary or appropriate for purposes of this opinion. In our examination we have assumed, with your permission, and without independent investigation or inquiry, the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified or photocopies and the authenticity of the originals of such latter documents. With your permission, we have further assumed that (i) the Owner Participant Documents and the Owner Participant Guaranty have been duly authorized, executed and delivered by each of the parties thereto, (ii) the respective parties thereto have the power and authority to execute, deliver and perform the Owner Participant Documents and the Owner Participant Guaranty, (iii) the execution, delivery and performance of the Owner Participant Documents and the Owner Participant Guaranty by the parties thereto do not and will not violate the certificate of incorporation, by-laws or other organizational documents of any such party or any bond, debenture, note, mortgage, indenture, lease or other agreement or instrument to which any such party is a party or by which any such party is bound and does and will fully comply with all laws and regulations applicable to each such party and (iv) the Owner Participant Documents and the Owner Participant Guaranty constitute valid, legal and binding obligations of the parties thereto (other than PMCC Leasing and PMCC), enforceable against such parties (other than PMCC Leasing and PMCC) in accordance with their respective terms. Based upon the foregoing, we are of the opinion that: 1. The Participation Agreement and the Amendment No. 1 to the Tax Indemnity Agreement constitute valid and legally binding obligations of PMCC Leasing enforceable against PMCC Leasing in accordance with their respective terms, and the Owner Participant Guaranty constitutes a valid and legally binding obligation of PMCC enforceable against PMCC in accordance with its terms. 2. The execution and delivery by PMCC Leasing of the Owner Participant Documents and the making of its investment thereby, and the execution and delivery by PMCC of the Owner Participant Guaranty, do not result in any violation of any Federal or New York statute or any order, rule or regulation issued pursuant to New York or Federal statute by any New York or Federal Court or governmental agency or body having jurisdiction over PMCC Leasing or PMCC, as the case may be. 3. No consent, approval, authorization, order, registration or qualification under any Federal or New York statute is required to be obtained by PMCC Leasing for the execution and delivery by PMCC Leasing of the Owner Participant Documents or the making of its investment thereby, or by PMCC for the execution and delivery by PMCC of the Owner Participant Guaranty. Our opinion in paragraph 1 is subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. We are members of the Bar of the State of New York and express no opinion herein concerning any law other than the laws of the State of New York. This opinion is rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose, or relied upon by or furnished to any other person, firm or corporation without our prior written consent, except that PMCC Leasing and PMCC may furnish a copy of this opinion to a potential transferee or participant of the interest of such entity or otherwise as required by a governmental authority. We rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(2)(b) [Letterhead of PMCC Leasing Corporation] [Refunding Date] To Each of the Persons Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have supervised corporate proceedings of Philip Morris Capital Corporation, a Delaware corporation ("PMCC") and of PMCC Leasing Corporation, a Delaware corporation (the "Owner Participant"), in connection with the Owner Participant's participation in the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among the Owner Participant; Federal Express Corporation as Lessee; First Security Bank, National Association, as Indenture Trustee, Pass Through Trustee and Subordination Agent; State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee; and Morgan Guaranty Trust Company of New York, as Original Loan Participant. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings set forth in Schedule II to the Participation Agreement. We have examined originals, or copies certified or otherwise identified to our satisfaction of the Participation Agreement, Ancillary Agreement I, Ancillary Agreement II, Amendment No. 1 to the Tax Indemnity Agreement, the Trust Agreement and the Owner Participant Guaranty (each such Participation Agreement, Ancillary Agreement I, Ancillary Agreement II, Amendment No. 1 to the Tax Indemnity Agreement, Trust Agreement and Owner Participant Guaranty to be hereafter referred to individually as an "Operative Document" and collectively as the "Operative Documents"). We have also examined such public records and such corporate documents, records and instruments of PMCC and the Owner Participant as in our judgement are necessary or appropriate to enable us to render the opinions expressed below. In rendering such opinions, we have relied upon the representations and warranties contained in or made pursuant to the Operative Documents, the accuracy of which we have not independently verified, and have assumed the due authorization, execution and delivery of all documents and instruments by all parties thereto other than the Owner Participant and PMCC. Based on the foregoing and subject to the qualifications and matters of reliance set forth herein, we are of the opinion that: 1. Each of PMCC and the Owner Participant is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full corporate power, authority and legal right to execute and deliver the Operative Documents to which either of them is a party and to fulfill and comply with the terms, conditions and other provisions thereof. 2. The Operative Documents to which the Owner Participant is a party have been duly authorized by all necessary corporate action on the part of the Owner Participant, and have been duly executed and delivered by the Owner Participant. 3. The Owner Participant Guaranty has been duly authorized by all necessary corporate action on the part of PMCC, and has been duly executed and delivered by PMCC. 4. No filing with, notice to or authorization or approval from any governmental or public body or authority is required under the laws of the State of New York, the laws of the United States of America, or the General Corporation Law of the State of Delaware in connection with the execution, delivery and performance by PMCC or the Owner Participant of the Operative Documents to which either of them is party. 5. There are no actions, suits or proceedings (whether or not purportedly on behalf of the Owner Participant) pending or, to my knowledge, threatened against PMCC or the Owner Participant at law or in equity which challenge the legality, validity or enforceability of such Operative Documents. 6. Neither the execution and delivery of the Operative Documents to which either PMCC or the Owner Participant is a party, the consummation of the transactions therein contemplated nor the fulfillment of or compliance with the terms, conditions and other provisions thereof will conflict with, or result in any breach of, any of the terms, conditions or provisions of (i) any law or regulation binding upon PMCC or the Owner Participant, (ii) to our knowledge after due inquiry, any order, injunction or decree of any court or governmental instrumentality binding upon PMCC or the Owner Participant, (iii) the Certificate of Incorporation or Bylaws of PMCC or the Owner Participant, or (iv) to our knowledge after due inquiry, any bond, debenture, note, mortgage indenture or other agreement or instrument providing for the issuance or guarantee of indebtedness for borrowed money to which the Owner Participant or PMCC is now a party or by which the property of the Owner Participant or PMCC may be bound. We are admitted to and are members in good standing of the bar of the State of New York, and do not purport to be conversant with, or to express any opinion herein concerning, the laws of any jurisdiction other than those of the State of New York and the United States of America and the General Corporation Law of the State of Delaware. In addition, we express no opinion concerning (i) the laws of the State of New York, the United States of America or any other jurisdiction applicable to the offering or sale of securities or (ii) ERISA. Further, we have made no investigation and express no opinion, as to any aviation law including, without limitation, the Federal Aviation Act of 1958, as amended, or other laws, statutes, rules or regulations applicable due to the particular nature of the equipment subject to the Lease. The opinion set forth above is given as of the date hereof and we disavow any undertaking or obligation to advise you of any changes in law or any facts or circumstances that may hereafter occur or come to our attention that could affect such opinion. This opinion is solely for the benefit of the addresses hereof and their respective successors and assigns for use in connection with the transactions contemplated by the Operative Documents and may not be relied upon by any other person or for any other purpose without our express written consent. This opinion may be relied upon by Simpson, Thacher & Bartlett in rendering their opinion of even date herewith. We rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(3) [Letterhead of Ray, Quinney & Nebeker] [Refunding Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N675FE (the "Aircraft") is being refinanced. This opinion is furnished pursuant to Section 4.01(l)(iv) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Ancillary Agreement I; (d) The Ancillary Agreement II; and (e) The Certificates. (each of the documents identified in paragraphs (a) through (e) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Refunding Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Refunding Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. We rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(4) [Letterhead of Bingham Dana LLP] [Refunding Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 between State Street and PMCC Leasing Corporation, as Owner Participant ("Owner Participant") (the "Trust Agreement") and to State Street Bank and Trust Company (the "Parent Guarantor") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); State Street, in its individual capacity and Owner Trustee; the Owner Participant; First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent; and Morgan Guaranty Trust Company of New York, as Original Loan Participant. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee and the Parent Guarantor has requested that we deliver this opinion to you in accordance with Section 4.01(l)(v) of the Participation Agreement. Our representation of State Street and the Parent Guarantor has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and the Parent Guarantor and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency and the Massachusetts Commissioner of Banks relating to State Street and the Parent Guarantor, respectively, the Owner Trustee Parent Guarantee of the Parent Guarantor dated as of the date hereof (the "Guaranty") and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street, the Owner Trustee and the Parent Guarantor), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street, the Owner Trustee and the Parent Guarantor). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee, the Parent Guarantor or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee, the Parent Guarantor and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed in paragraphs 1 through 14 are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America and the opinions expressed in paragraphs 15 through 19 are limited solely to the laws of the Commonwealth of Massachusetts and the federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 11 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. On the Delivery Date, the Owner Trustee received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. 15. The Parent Guarantor is a Massachusetts trust company, duly organized, existing and in good standing with the Commissioner of Banks of the Commonwealth of Massachusetts under the laws of the Commonwealth of Massachusetts. 16. The Parent Guarantor has full corporate power and authority to enter into, deliver and perform its obligations under the Guaranty, and the Guaranty has been duly authorized, executed and delivered by the Parent Guarantor, is a legal, valid and binding obligation of the Parent Guarantor and is enforceable against the Parent Guarantor in accordance with its terms. 17. The execution and delivery of the Guaranty and compliance by the Parent Guarantor with all of the provisions thereof do not and will not contravene (a) any provisions of any requirement of law or of any rule or regulation or any judgement or order known to us of any court or governmental authority applicable to or binding on the Parent Guarantor or any of its properties, (b) any contractual obligations of the Parent Guarantor known to us, or (c) any of the provisions of its charter documents or by-laws. 18. No consent or authorization of, notice to, filing or registration with, or other act by or in respect of, any federal or Massachusetts governmental authority and, to our knowledge, no consent of any other person (including, without limitation, any stockholder or creditor of the Parent Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of the Guaranty against the Parent Guarantor. 19. To our knowledge, there are no proceedings pending or threatened against or affecting the Parent Guarantor in or before any court or by or before any governmental authority, administrative agency, arbitration board or tribunal which, individually or in the aggregate, if adversely determined, would materially adversely affect the ability of the Parent Guarantor to perform its obligations under the Guaranty. We rendered an opinion dated June 18, 1998 (the "Delivery Date Opinion"), a copy of which is attached hereto, in connection with the financing and acquisition of the Aircraft on such date. We hereby consent and agree that the addressees hereto who were not addressees to the Delivery Date Opinion may rely on the Delivery Date Opinion as fully and with the same force and effect as if such addressees were originally named therein on the date of the Delivery Date Opinion. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(5) [Letterhead of Ray, Quinney & Nebeker] [Refunding Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N675FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N675FE (the "Aircraft") is being refinanced. This opinion is furnished pursuant to Section 4.01(l)(vi) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Refunding Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Refunding Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(6)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozsseordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(6)(b) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Refunding Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(7) [Letterhead of Daugherty, Fowler & Peregrin] [Refunding Date] To the Parties Named on Schedule A attached hereto Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.01(l)(viii) of the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") among Federal Express Corporation, as lessee (the "Lessee"), PMCC Leasing Corporation, as owner participant (the "Owner Participant"), Morgan Guaranty Trust Company of New York, as original loan participant (the "Original Loan Participant"), State Street Bank and Trust Company of Connecticut, National Association, as owner trustee (the "Owner Trustee"), and First Security Bank, National Association, as indenture trustee, pass through trustee and subordination agent (the "Indenture Trustee"), which Participation Agreement amends and restates that certain Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998 (the "Original Participation Agreement") among the Lessee, the Owner Participant, the Original Loan Participant, the Owner Trustee and the Indenture Trustee, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement amends and restates the Original Trust Agreement, which Trust Agreement was filed at ____ _.m., C._.T.; (b) Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Indenture") between the Owner Trustee and the Indenture Trustee, which Indenture amends and restates the Original Indenture, which Indenture was filed at ____ _.m., C._.T.; and, (c) Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Lease") between the Owner Trustee, as lessor, and the Lessee, as lessee, which Lease amends and restates the Original Lease, with the Indenture attached thereto, which Lease with the Indenture attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. AC Form 8050-2 Aircraft Bill of Sale dated June 18, 1998 (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee has been duly recorded by the FAA on __________________ and assigned Conveyance No. ______; 2. the Indenture and the Lease with the Indenture attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 3. the Trust Agreement is in due form for filing and has been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Original Trust Agreement was duly filed with the FAA on June 18, 1998 pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 5. the Original Indenture with the Indenture and Security Agreement Supplement attached has been duly filed with and duly recorded by the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 6. the Original Lease with the Lease Supplement, the Original Indenture and the Indenture and Security Agreement Supplement attached was duly filed with and duly recorded by the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 7. the Airframe is duly registered in the name of the Owner Trustee pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 8. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, and (ii) the rights of the parties under the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement; 9. the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 10. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement, the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement, or the Original Trust Agreement, as amended and restated by the Trust Agreement, except for such filings as are referred to in our opinion dated June 18, 1998 (which have been duly effected) and the filings referred to in clauses (a), (b) and (c) above; and, 11. neither the authorization, issuance and delivery of the Certificates, the execution and delivery by the parties thereto of the Original Trust Agreement, the Trust Agreement, the Original Indenture, the Indenture, the Indenture and Security Agreement Supplement, the Original Participation Agreement, the Participation Agreement, the FAA Bill of Sale, the Original Lease, the Lease and the Lease Supplement or the performance by the parties thereto of: (i) the Original Trust Agreement, as amended and restated by the Trust Agreement; (ii) the Original Indenture, as amended and restated by the Indenture, as supplemented by the Indenture and Security Agreement Supplement; (iii) the Original Participation Agreement, as amended and restated by the Participation Agreement; and (iv) the Original Lease, as amended and restated by the Lease, as supplemented by the Lease Supplement, in accordance with the provisions thereof, nor the consummation by the parties thereto of any of the transactions contemplated thereby, requires the consent or approval of, or the giving of notice to, or the registration with, or the taking of any other action in respect of, the FAA except for the filings, the recordations and the filings for recordations specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under 29 U.S.C. Section 1368(a), possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel for the Aeronautical Center dated ____________, 1998 and have continued to rely upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated __________________, copies of which are attached hereto. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Agent and Original Loan Participant Morgan Guaranty Trust Company of New York Owner Participant PMCC Leasing Corporation Owner Participant Guarantor Philip Morris Capital Corporation Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Annex I Certain Definitions Airframe, Engines and Aircraft One (1) Airbus Industrie A300F4-605R aircraft bearing manufacturer's serial number 789 and U.S. Registration No. N675FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial number 705-261 and 705-262 (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Original Trust Agreement Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between PMCC Leasing Corporation, as owner participant, and State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, which was filed with the FAA on June 18, 1998. Original Indenture Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, and First Security Bank, National Association, as indenture trustee, which together with the Indenture and Security Agreement Supplement (as hereinafter defined) attached thereto was recorded as one instrument by the FAA on ________________ and assigned Conveyance No. _______. Indenture and Security Agreement Supplement Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, and First Security Bank, National Association, as indenture trustee, with respect to the Aircraft, which was attached to and recorded by the FAA as one instrument with the Original Indenture. Original Lease Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, as lessor, and Federal Express Corporation, as lessee, which together with the Lease Supplement (as hereinafter defined), the Original Indenture and the Indenture and Security Agreement Supplement attached thereto was recorded as one instrument by the FAA on ________________ and assigned Conveyance No. _______. Lease Supplement Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE) dated June 18, 1998 between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee, as lessor, and Federal Express Corporation, as lessee, with respect to the Aircraft, which was attached to and recorded by the FAA as one instrument with the Original Lease. Confidential Omissions The Lease was filed with the FAA, with (i) Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV), (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement II, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E-1 FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT BENEFICIAL INTEREST TRANSFER AGREEMENT (this "Document"), dated as of _______ __, ____, between ______________, a ______________ corporation ("Transferor") and ______________, a ______________ corporation ("Transferee"). W I T N E S S E T H : WHEREAS, the parties hereto desire to effect (a) the transfer by Transferor to Transferee of all of the rights, title and interest of Transferor in and to its interest (the "Beneficial Interest") under the Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (as heretofore amended, the "Trust Agreement"), between Transferor and State Street Bank and Trust Company of Connecticut, National Association, and the Lessor's Estate created thereunder, and all of Transferor's rights and obligations under the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated therein, but solely as Owner Trustee, PMCC Leasing Corporation, as Owner Participant, First Security Bank, National Association, not in its individual capacity, except as otherwise stated therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual capacity, except as otherwise stated therein, but solely as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Loan Participant, and under the other Operative Agreements and (b) the acceptance by Transferee of such transfer and the assumption by Transferee of such obligations of Transferor thereunder; and WHEREAS, Section 7.03(d) of the Participation Agreement permits such transfer and assumption upon satisfaction of certain conditions heretofore or concurrently herewith being observed; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in the Participation Agreement. 2. Transfer. Transferor does hereby sell, convey, assign, transfer and set over, unto Transferee, as of the Effective Time (as defined below), all of Transferor's present and future right, title and interest in and to (a) all of the Beneficial Interest and (b) all of the Owner Participant's rights and obligations under the Participation Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements and any proceeds therefrom, together with all other documents and instruments evidencing any of such right, title and interest, except such rights of Transferor as have arisen or accrued to Transferor prior to the Effective Time (including without limitation, the right to receive any amounts due or accrued to Transferor under the Operative Agreements as of a time prior to the Effective Time and the right to receive any indemnity payment pursuant to the Participation Agreement or the Tax Indemnity Agreement, with respect to events occurring prior to such time); all of the foregoing that is being transferred under this paragraph 2, the "Transferred Interest". 3. Assumption. Transferee hereby accepts the transfer of the Transferred Interest and, for the benefit of Transferor and the other parties to the Participation Agreement, assumes and undertakes and agrees to perform and discharge all of the duties and obligations of Transferor with respect to the Transferred Interest whenever and wherever accrued (other than duties and obligations of Transferor required to be performed by it on or prior to the Effective Time). Transferee hereby confirms that, from and after the Effective Time, Transferee (a) shall be deemed, to the extent set forth in Section 2 hereof, the "Owner Participant" party to the Participation Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements and (b) shall be bound by all of the terms of the Operative Agreements to the extent the same relate to the Transferred Interest. 4. Release of Transferor. At the Effective Time, Transferor shall be relieved of all of its duties and obligations with respect to the Transferred Interest under the Operative Agreements, provided, however, that Transferor shall in no event be released from any such duty or obligations arising or relating to any event occurring prior to the Effective Time, or on account of any breach by Transferor of any of its representations, warranties, covenants or obligations set forth in the Operative Agreements, or for any fraudulent or willful misconduct engaged in by it prior to the Effective Time, or from any obligation that relates to any indemnity claimed by Transferor or any Lessor's Lien attributable to Transferor. 5. Fees and Expenses. The fees, expenses and charges of the parties to the Participation Agreement incurred in connection with the transfer effected hereby shall be for the account of [specify Transferor/Transferee]. 6. Payments. Transferor hereby covenants and agrees to pay over to Transferee, if and when received following the Effective Time, any amounts (including any sums payable as interest in respect thereof) paid on account of the Transferred Interest to or for the benefit of Transferor, and Transferee hereby covenants and agrees to pay over to Transferor, if and when received following the Effective Time, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of Transferee that are not attributable to the Transferred Interest and to which Transferor is otherwise entitled. 7. Investment Purpose. Transferee hereby represents and warrants that, as of the date hereof, it is acquiring the Transferred Interest for its account with no present intention of distributing such Transferred Interest or any part thereof in any manner which would violate the Securities Act of 1933, as amended, but without prejudice, however, to the right of Transferee at all times to sell or otherwise dispose of all or any part of such Transferred Interest in compliance with Section 7.03(d) of the Participation Agreement. 8. Representations and Warranties of Transferor. Transferor represents and warrants to Transferee that as of the Effective Time: (a) Organization and Power. Transferor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power, authority and legal right to execute, deliver and perform this Agreement and to enter into and carry out the transactions contemplated hereby and in the other Operative Agreements (the "Transactions"). (b) Authorization, Execution and Validity. This Agreement has been duly authorized, executed and delivered by Transferor and constitutes the legal, valid and binding obligation of Transferor, enforceable against it in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity. (c) Conflict. The execution, delivery and performance by Transferor of this Agreement and compliance by Transferor with all of the provisions hereof do not contravene any regulation or any order of any governmental authority applicable to or binding on Transferor, or contravene the provisions, or constitute a default by Transferor under, its certificate of incorporation or by-laws or any indenture, mortgage, contract or other agreement or instrument to which Transferor is a party or by which Transferor or any of its Properties is bound or affected. (d) Consents. No consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice or the taking of any other action with respect to, any governmental authority on the part of Transferor is required in connection with the execution, delivery and performance by Transferor of this Agreement. (e) Litigation. There are no proceedings pending or, to the knowledge of Transferor, threatened against Transferor before any governmental authority that would materially and adversely affect the ability of Transferor to consummate the Transactions. (f) No Liens. The Trust Estate is free of Lessor's Liens attributable to Transferor. (g) Compliance with Operative Agreements. Transferor has fully performed all of its obligations under the Participation Agreement and under each other Operative Agreement which obligations by their terms are required to be satisfied or performed prior to the Effective Time or prior to the consummation of the Transactions. (h) Default. As a result of the transfer effected hereby, no Indenture Default attributable to the Owner Participant or the Owner Trustee has occurred and is continuing. Notwithstanding the foregoing or anything else contained in this Agreement, it makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, including, without limitation, the airworthiness, value, condition, workmanship, design, patent or trademark infringement, operation, merchantability or fitness for use of the Aircraft. 9. Representations and Warranties of Transferee. Transferee represents and warrants to Transferor and to the other parties to the Participation Agreement that as of the Effective Time: (a) Transferee is a corporation duly organized, validly existing and in good standing under the laws of the State of [ ], has the full corporate power, authority and legal right to carry on its business as now conducted, and has full corporate power, authority and legal right to execute, deliver and perform this Agreement and to enter into and carry out the transactions contemplated hereby and in the other Operative Agreements (the "Transactions"); (b) Transferee has full corporate power, authority and legal right to execute, deliver and enter into this Agreement and the other Operative Agreements and full corporate power and authority to perform its obligations thereunder, and such execution, delivery and performance do not and will not contravene any applicable law or any order of any governmental authority applicable to or binding on the Transferee, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien upon the property of the Transferee under, its articles of incorporation or by-laws or any material indenture, mortgage, contract or other agreement or instrument to which the Transferee is a party or by which it or any of its property may be bound or affected; (c) the execution, delivery and performance of this Agreement by the Transferee (i) has been duly authorized by all necessary corporate action and (ii) does not require any approval of the shareholders of the Transferee or any approval or consent of, or notice to, any trustee or holders of any indebtedness or obligation of the Transferee, except for such approvals and consents as have already been obtained; (d) this Agreement has been duly executed and delivered by the Transferee, and constitutes the legal, valid and binding obligation of the Transferee, enforceable against the Transferee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (e) there are no proceedings or actions pending or, to the knowledge of the Transferee, threatened against the Transferee before any governmental authority in which there is a reasonable probability of an adverse determination that individually or in the aggregate would materially and adversely impair the ability of the Transferee to perform its obligations under this Agreement or the Operative Agreements, or which involve the Transactions or question the validity of any Operative Agreement to which the Owner Participant is a party or any action taken or to be taken pursuant thereto; and the Transferee is not in default with respect to any order of any governmental authority which involves the Transactions or the default under which would materially and adversely affect the ability of the Transferee to perform its obligations under this Agreement or any of the Operative Agreements; (f) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any governmental authority is required under any law for the execution and delivery by the Transferee of this Agreement, or the carrying out by the Transferee of any of the Transactions, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (g) the Lessor's Estate is free of any Lessor's Liens attributable to the Transferee; (h) the Transferee, upon execution of this Agreement, will not be in default under any of the Operative Agreements; (i) no part of the funds to be used by it to acquire the interests acquired by the Owner Participant under the Participation Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (j) the Transferee is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country and if it shall at any time cease to be such a "U.S. Person" or shall become a tax resident of another country, it shall furnish to the Agent and each Certificate Holder an indemnity, in form and substance reasonably satisfactory to such Certificate Holder, for any Taxes that may be imposed on such Holder as a result of its failure to be such a "U.S. Person" or as a result of its being a tax resident of another country, and it shall be personally liable for any debt service to the extent that the receipt of rentals is reduced by reason of any withholding Taxes that result from such failure to be such a "U.S. Person" or from being a tax resident of another country; (k) [after giving effect to a voting trust or similar agreement(1), Transferee is a Citizen of the United States] [applicable if Aircraft is registered in the United States or is proposed to be so registered]; (l) on and as of the Effective Date, the representations and warranties of the Owner Participant in Article 7 of the Participation Agreement are true and correct as to the Transferee; (m) Transferee satisfies the conditions applicable to a transferee of the Beneficial Interest set forth in Section 7.03(d) of the Participation Agreement, including without limitation, the condition set forth in the last sentence thereof [and to the extent the same has been requested by the Lessee or the Indenture Trustee, Transferee has heretofore provided to the Lessee and the Indenture Trustee its most recent audited financial statements, which show a consolidated tangible net worth or combined capital and surplus of at least $75,000,000] [remove bracketed language if an Owner Participant Guaranty is provided]; and (n) the Transferee has, independently and without reliance upon any other party (including without limitation the Transferor) and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement, and the Transferee has established adequate means of obtaining from Lessee on a continuing basis information pertaining to, and is now and on a continuing basis will be ---------- (1) Such voting trust or similar agreement must be reasonably satisfactory to the Lessor and the Indenture Trustee. completely familiar with, the financial condition, operations, properties and prospects of Lessee. Notwithstanding the foregoing or anything else contained in this Agreement, it makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, including, without limitation, the airworthiness, value, condition, workmanship, design, patent or trademark infringement, operation, merchantability or fitness for use of the Aircraft, other than such laws, rules or regulations relating to the citizenship requirements of it under applicable aviation law. 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 11. Effectiveness. This Agreement shall be effective upon the mutual execution and delivery of this Agreement (the "Effective Time"). 12. Counterparts. This 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. 13. Beneficiaries. Each of the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee, together with their respective successors and permitted assigns, is and shall be deemed a third party beneficiary of this Agreement entitled to enforce this Agreement directly and in its own name and enforce any rights or claims of the parties hereto. 14. Further Assurances. Each party agrees that from time to time after the Effective Time, it shall execute and deliver or cause to be executed and delivered such instruments, documents and papers, and take all such further action as may be reasonably required in order to consummate fully the purposes of this Agreement and to implement the transactions contemplated hereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [TRANSFEROR] By:_____________________________________ Name: Title: [TRANSFEREE] By:_____________________________________ Name: Title: EXHIBIT E-2 FORM OF OWNER PARTICIPANT GUARANTY TRANSFEREE'S PARENT GUARANTY, dated as of ___________ __, ____, (this "Guaranty") by ____________________, a ___________ corporation (the "Guarantor"), to State Street Bank and Trust Company of Connecticut, National Association, in its individual capacity and as Owner Trustee, First Security Bank, National Association, as Indenture Trustee and Pass Through Trustee, and Federal Express Corporation, as Lessee (collectively, together with their successors and assigns and the holders from time to time of the Certificates, the "Beneficiaries"). W I T N E S S E T H : WHEREAS, ___________, a ____________ corporation (the "Transferor"), is party to the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Participation Agreement"), among Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual, except as otherwise stated therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual, except as otherwise stated therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual, except as otherwise stated therein, but solely as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent and Morgan Guaranty Trust Company of New York, as Loan Participant; and WHEREAS, the Transferor wishes to transfer, among other things, all of the rights, title and interest of the Transferor in and to the Beneficial Interest under the Trust Agreement and the Lessor's Estate created thereunder, and all of the Transferor's rights and obligations under the Participation Agreement, the Trust Agreement and the other Operative Agreements to __________________, a _______________ [corporation] (together with its successors and assigns, the "Transferee"), a subsidiary of the Guarantor, pursuant to the Beneficial Interest Transfer Agreement, dated as of the date hereof (the "Transfer Agreement"), between the Transferor and the Transferee; and WHEREAS, the terms of the Participation Agreement provide that the aforementioned transfer is conditioned upon the execution and delivery of this Guaranty by the Guarantor; NOW, THEREFORE, in order that the Transferor may make the aforementioned transfer to the Transferee, the Guarantor hereby agrees with and for the benefit of the Beneficiaries as follows: 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Participation Agreement or the Transfer Agreement. 2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor and not merely surety, to the Beneficiaries the prompt and complete payment by the Transferee when due of all payment obligations of the Transferee under the Operative Agreements without offset or deduction and the timely performance of all other obligations of the Transferee thereunder (such payment and other obligations, the "Obligations"), and the Guarantor further agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) that may be paid or incurred by the Beneficiaries in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guaranty. The Guarantor will not exercise any rights that it may now or hereafter acquire against Transferee that arise from the existence, payment, performance or enforcement of the Guarantor's Obligations under this Guaranty, the Transferred Interest or the Operative Agreements, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Beneficiary against Transferee or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from Transferee, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations have been performed in full and all other amounts payable under this Guaranty shall have been paid in full in cash. If any amount shall be paid to the Guarantor in violation of the preceding sentence at any time prior to the final payment in full in cash of the Obligations and all other amounts payable under this Guaranty, such amount shall be held in trust for the benefit of any Beneficiary and shall forthwith be paid to such Beneficiary to be credited and applied to the Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Operative Agreements, or to be held as collateral for any Obligations or other amounts payable under this Guaranty thereafter arising. 3. No Subrogation. Notwithstanding anything to the contrary in this Guaranty, the Guarantor hereby agrees not to assert any rights which may have arisen in connection with this Guaranty to be subrogated to any of the rights (whether contractual, under the Bankruptcy Code, under common law or otherwise) of any Beneficiary against the Transferee for the payment of the Obligations until all of the Obligations shall have been satisfied by payment and performance in full. 4. Amendments with Respect to the Obligations; Waiver of Rights. The Guarantor shall remain fully obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the obligations continued, and the Obligations, may, from time to time, in whole or part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Operative Agreement may be amended, modified, supplemented or terminated, in whole or in part, in accordance with the provisions thereof from time to time. When making any demand hereunder against the Guarantor, a Beneficiary may, but shall be under no obligation to, make a similar demand on the Transferee, and any failure by a Beneficiary to make any such demand or to collect any payments from the Transferee or any release of the Transferee shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Beneficiary against the Guarantor. For the purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings. The Guarantor represents and warrants that it is the parent of the Transferee, and agrees that its obligations hereunder shall continue unimpaired, even if the Guarantor is no longer an Affiliate of the Transferee. 5. Guaranty Absolute and Unconditional. The Guarantor guarantees that the Obligations will be paid and performed strictly in accordance with the terms of the Transfer Agreement and the Operative Agreements, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any such terms or the rights of any Beneficiary with respect thereto. The obligations of the Guarantor under this Guaranty are independent of the Obligations or any other obligations of any other party, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether the Transferee or any other party is joined in any such action or actions. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between the Transferee or the Guarantor and any Beneficiary shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. The Guarantor waives, to the fullest extent permitted by applicable law, diligence, presentment, promptness, protest, mitigation of damages by the Beneficiaries demand for payment and notice of default or nonpayment to or upon the Transferee or the Guarantor with respect to the Obligations. The Guarantor further waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Obligations, whether existing now or in the future. The Guarantor understands and agrees that, to the fullest extent permitted by applicable law, this Guaranty shall be construed as a continuing, absolute and unconditional guaranty of payment and performance (and not merely of collectibility) without regard to: (a) the validity, regularity or enforceability of the Transfer Agreement, any Operative Agreement, or any of the Obligations at any time or from time to time held by any Beneficiary; (b) any defense, set-off, rebate, adjustment, withholding, deduction or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Transferee against any Beneficiary or any agreement or instrument relating thereto or; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations or any other obligations of any other party under the Transfer Agreement, the Operative Agreements, or any other amendment or waiver of or any consent to departure from the Transfer Agreement or other Operative Agreements; (d) any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; (e) any change, restructuring or termination of the corporate structure or existence of the Guarantor or the Transferee or any of the Affiliates of either; (f) any defect in the title, condition, design, operation or fitness of, or any interference with the operation, use or possession of, the Aircraft; (g) any failure to establish, perfect or preserve title to or any security interest in or to the Aircraft or any other collateral security for the Obligations; or (h) any other circumstance whatsoever or any existence of or reliance on any representation by any Beneficiary that might otherwise constitute a defense available to, or a discharge of, the Guarantor or any other guarantor or surety. When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Transferee for the Obligations, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Transferee, or any release of the Transferee, shall not, to the fullest extent permitted by applicable law, relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guaranty is a continuing guaranty and shall remain in full force and effect until the earlier of (x) the date that all of the Obligations are satisfied by payment and performance in full and (y) the date that all right, title and interest of the Transferee shall have been transferred to a Person meeting the requirements of Section 7.03(d) of the Participation Agreement in accordance with said section; provided that this Guaranty shall remain in full force and effect with respect to obligations relating to the period prior to such transfer. 6. Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Beneficiary upon the insolvency, bankruptcy dissolution, liquidation or reorganization of the Transferee or the Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Transferee or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made and the Guarantor agrees that it will indemnify any such Beneficiary on demand for all reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) by such Beneficiary in connection with such rescission or restoration. 7. Payments. The Guarantor hereby guarantees that payments hereunder shall be paid without set-off, counterclaim, deduction, rebate, adjustment or withholding, and shall be made in U.S. Dollars in immediately available funds. 8. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and the Transferee is currently a subsidiary of the Guarantor; (b) the Guarantor has the power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guaranty; (c) this Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of this Guaranty will not violate any provision of any requirement of law or contractual obligation of the Guarantor or any of its constitutive documents; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty; (f) the Guarantor is a [a bank, savings institution, finance company, leasing company or trust company, national banking association acting for its own account or in a fiduciary capacity as trustee or agent under any pension, retirement, profit sharing or similar trust or fund, insurance company, fraternal benefit society or corporation acting for its own account having a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent)] of not less than $75,000,000 [and has, if the same have been requested by the Lessee or the Indenture Trustee, heretofore furnished to the Lessee and the Indenture Trustee copies of its most recent audited financial statements]; (g) there are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived; and (h) the Guarantor has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and the Guarantor has established adequate means of obtaining from Transferee on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the financial condition, operations, properties and prospects of Transferee. 9. Severability. Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10. Jurisdiction; Waiver of Jury Trial, Etc. (a) The Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York, New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty, the Transfer Agreement or any Operative Agreement to which it is or is to be a party, or for recognition or enforcement of any judgment, and the Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty, the Transfer Agreement or any Operative Agreement to which it is or is to be a party in the courts of any jurisdiction. (b) The Guarantor irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty, the Transfer Agreement or any Operative Agreement to which it is or is to be a party in any New York State or federal court. The Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 11. Section Headings. The Section headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 12. No Waiver; Cumulative Remedies. No Beneficiary shall by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right power or privilege. A waiver by a Beneficiary of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Beneficiary would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 13. Amendments and Waivers. None of the terms or provisions of this Guaranty may be waived, amended or supplemented or otherwise modified except by a written instrument executed by the Guarantor and each Beneficiary. 14. Successors and Assigns. This Guaranty shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Beneficiaries and their respective successors and permitted assigns but Guarantor may not assign this Guaranty without prior written consent of the Beneficiaries except to an assignee making, as of the date of such assignment, (i) representations and warranties substantially similar to those contained in Section 8 hereof and (ii) a representation that it is a U.S. citizen, unless, in the case of the preceding clause (ii) any of (a) the aircraft is not then registered in the United States nor contemplated to be so registered or (b) a voting trust or similar arrangement reasonably satisfactory to the Beneficiaries is in place with respect to such registration or (c) it is not necessary for the Guarantor to be a U.S. citizen in order for the aircraft to remain registered in the United States. 15. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 16. Notices. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made, when delivered by hand or by mail, upon receipt, or, when delivered by facsimile transmission, upon being sent and confirmed, addressed (a) in the case of the Guarantor, to the Guarantor at its office at [_________________________________], and (b) in the case of any Beneficiary, to such Beneficiary at the address provided for such Beneficiary in or pursuant to the Participation Agreement. IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered by its duly authorized officer as of the day and year first above written. [NAME OF GUARANTOR] By:_____________________________________ Name: Title: EX-4.C 8 - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 790, REGISTRATION NO. N676FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate.......................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee....................................... 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee............................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4100000000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than July 15, 1998 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N676FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $32,271,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N676FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: $13,080,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N676FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,573,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N676FE and Manufacturer's serial number 790, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N676FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on July 15, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N676FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. October 13, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N676FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $59,924,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A ---------- Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A ---------- Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N676FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N676FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ----------------------------------- Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N676FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A ---------- Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N676FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N676FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N676FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 790 and U.S. Registration No. N676FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A ---------- Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e of this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 of this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d of this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 790, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N676FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N676FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 790 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 791, REGISTRATION NO. N677FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate.......................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee............................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4212500000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than August 26, 1998 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N677FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $32,879,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N677FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2019 Principal Amount: 13,410,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N677FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,115,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N677FE and Manufacturer's serial number 791, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N677FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on August 26, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N677FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. November 24, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N677FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $60,404,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N677FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N677FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N677FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N677FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N677FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N677FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 791 and U.S. Registration No. N677FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e of this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 of this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d of this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 791, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N677FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N677FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 791 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 792, REGISTRATION NO. N678FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee............................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4150000000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than September 23, 1998 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N678FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2019 Principal Amount: $31,796,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N678FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $12,603,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N678FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2015 Principal Amount: $13,621,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N678FE and Manufacturer's serial number 792, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N678FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 23, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N678FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 22, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N678FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or July 15, 2018, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2017. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $58,020,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N678FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N678FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N678FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N678FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N678FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N678FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 792 and U.S. Registration No. N678FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 792, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N678FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N678FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 792 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 793, REGISTRATION NO. N679FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee........................................ 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants............................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee......... ...................... 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4037500000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than October 22, 1998 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N679FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $33,362,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N679FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $13,113,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N679FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $12,558,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N679FE and Manufacturer's serial number 793, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N679FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on October 22, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N679FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. January 20, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N679FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $59,033,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease - ----- Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement - ----------------------- The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N679FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N679FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N679FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N679FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N679FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N679FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 793 and U.S. Registration No. N679FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 793, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N679FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N679FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 793 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 794, REGISTRATION NO. N680FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee............................................ 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee........................................ 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants................................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee................................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.4137500000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than November 12, 1998 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N680FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $33,154,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N680FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2017 Principal Amount: $13,321,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N680FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $13,836,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N680FE and Manufacturer's serial number 794, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N680FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on May 12, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N680FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. February 10, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N680FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $60,311,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease - ----- Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement - ----------------------- The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N680FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N680FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N680FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N680FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N680FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N680FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions Airframe, Engines and Aircraft One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 794 and U.S. Registration No. N680FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 794, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President Execution Document AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N680FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: Execution Document AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N680FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 794 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: ================================================================================ PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ------------------------------ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 799, REGISTRATION NO. N681FE ================================================================================ TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS ............................................................... 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. ......................................... 4 Section 2.02. (a) Certificates............................................. 5 (b) Transfer of Beneficial Interest. ...................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date................ 5 Section 2.04. Event of Loss Prior to Delivery Date. ...................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date............................ 7 Section 3.02. Commitments to Participate in Purchase Price................ 7 Section 3.03. Postponement of Delivery Date............................... 10 Section 3.04. Closing ................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date)............. 11 Section 4.02. Conditions Precedent (Delivery Date)........................ 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration....... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations................ 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties..................... 29 Section 6.02. Offering by Lessee.......................................... 35 Section 6.03. Certain Covenants of Lessee................................. 35 Section 6.04. Survival of Representations and Warranties. ................ 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. 43 Section 7.02. Citizenship................................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant............................................ 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee.......................................... 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee................................................ 50 Section 7.06. Indenture Trustee's Notice of Default....................... 52 Section 7.07. Releases from Indenture..................................... 52 Section 7.08. Covenant of Quiet Enjoyment................................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties. ..... 52 Section 7.10. Survival of Representations, Warranties and Covenants....... 53 Section 7.11. Lessee's Assumption of the Certificates. ................... 53 Section 7.12. Indebtedness of Owner Trustee............................... 56 Section 7.13. Compliance with Trust Agreement, Etc. ...................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants. ............................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes............................ 58 Section 8.02. After-Tax Basis............................................. 63 Section 8.03. Time of Payment............................................. 63 Section 8.04. Contests.................................................... 64 Section 8.05. Refunds..................................................... 66 Section 8.06. Lessee's Reports............................................ 66 Section 8.07. Survival of Obligations..................................... 67 Section 8.08. Payment of Taxes............................................ 67 Section 8.09. Reimbursements by Indemnitees Generally..................... 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................... 67 Section 9.02. After-Tax Basis............................................. 71 Section 9.03. Subrogation................................................. 72 Section 9.04. Notice and Payment.......................................... 72 Section 9.05. Refunds..................................................... 72 Section 9.06. Defense of Claims. ......................................... 73 Section 9.07. Survival of Obligations..................................... 73 Section 9.08. Effect of Other Indemnities................................. 74 Section 9.09. Interest.................................................... 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs.......................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee..................... 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant....................... 78 Section 12.02. Interest of Holders of Certificates........................ 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. ..................... 79 Section 13.02. Further Assurances......................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment........................................ 79 ARTICLE 14 NOTICES Section 14.01. Notices.................................................... 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing. .............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]................................................. 83 Section 17.02. Collateral Account......................................... 84 Section 17.03. Counterparts............................................... 86 Section 17.04. No Oral Modifications...................................... 86 Section 17.05. Captions................................................... 86 Section 17.06. Successors and Assigns. ................................... 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee.................................. 86 Section 17.08. Severability............................................... 87 Section 17.09. Public Release of Information.............................. 87 Section 17.10. Certain Limitations on Reorganization...................... 87 Section 17.11. GOVERNING LAW.............................................. 88 Section 17.12. Section 1110 Compliance.................................... 88 Section 17.13. Reliance of Liquidity Providers. .......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. .......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Delivery Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Delivery Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the CutOff Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viiI) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiiI) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.5187500000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D- 60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431- 2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than May 20, 1999 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By: ------------------------------------- Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By: ------------------------------------- Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: ------------------------------------- Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By: ------------------------------------- Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By: ------------------------------------- Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By: ------------------------------------- Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N681FE Interest Rate: 6.720% Maturity: January 15, 2021 Principal Amount: $34,489,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N681FE Interest Rate: 6.845% Maturity: January 15, 2018 Principal Amount: $13,271,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N681FE Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,489,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N681FE and Manufacturer's serial number 799, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N681FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050- 2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on November 20, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N681FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 18, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A- 1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N681FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $62,249,000 Letter of Credit Maximum Stated Amount $5,500,000 SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1- A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4- 605R aircraft bearing U.S. Registration No. N681FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9- 402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9- 106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9- 402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N681FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilproze(beta)ordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilproze(beta)ordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N681FE Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N681FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N681FE Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N681FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N681FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions Airframe, Engines and Aircraft One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 799 and U.S. Registration No. N681FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___- ___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant Federal Express Corporation Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent First Security Bank, National Association Underwriters Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider Kreditanstalt fur Wiederaufbau Owner Participant [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K] EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 799, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By _____________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By _____________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N681FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N681FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further ------- extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company - ----------------------------------- Name: Title: Federal Express Corporation - ----------------------------------- Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee - ----------------------------------- Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 799 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company - ------------------------------ Name: Title: - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) Dated as of June 15, 1998 among FEDERAL EXPRESS CORPORATION, Lessee and Initial Owner Participant STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity Except as Otherwise Expressly Set Forth Herein, but Solely as Owner Trustee, Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Indenture Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, Pass Through Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, Subordination Agent ______________________________ LEVERAGED LEASE OF ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 800, REGISTRATION NO. N682FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Initial Recitals........................................................... 1 ARTICLE 1 DEFINITIONS............................................................. 3 ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds........................................ 4 Section 2.02. (a) Certificates.......................................... 5 (b) Transfer of Beneficial Interest..................................... 5 Section 2.03. Amendments on Delivery Date or Transfer Date............. 5 Section 2.04. Event of Loss Prior to Delivery Date..................... 7 ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date......................... 7 Section 3.02. Commitments to Participate in Purchase Price............. 7 Section 3.03. Postponement of Delivery Date............................ 10 Section 3.04. Closing.................................................. 11 ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date).......... 11 Section 4.02. Conditions Precedent (Delivery Date)..................... 19 Section 4.03. Opinion of Special Aviation Counsel Upon Registration.... 28 ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations............. 28 ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties.................. 29 Section 6.02. Offering by Lessee....................................... 35 Section 6.03. Certain Covenants of Lessee.............................. 35 Section 6.04. Survival of Representations and Warranties............... 43 ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate................................................... 43 Section 7.02. Citizenship.............................................. 44 Section 7.03. Representations, Warranties and Covenants of Owner Participant.............................................. 45 Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee.................................... 48 Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee.................................................. 50 Section 7.06. Indenture Trustee's Notice of Default.................... 52 Section 7.07. Releases from Indenture.................................. 52 Section 7.08. Covenant of Quiet Enjoyment.............................. 52 Section 7.09. Pass Through Trustee's Representations and Warranties.... 52 Section 7.10. Survival of Representations, Warranties and Covenants.... 53 Section 7.11. Lessee's Assumption of the Certificates.................. 53 Section 7.12. Indebtedness of Owner Trustee............................ 56 Section 7.13. Compliance with Trust Agreement, Etc..................... 56 Section 7.14. Subordination Agent's Representations, Warranties and Covenants............................................ 56 ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes......................... 58 Section 8.02. After-Tax Basis.......................................... 63 Section 8.03. Time of Payment.......................................... 63 Section 8.04. Contests................................................. 64 Section 8.05. Refunds.................................................. 66 Section 8.06. Lessee's Reports......................................... 66 Section 8.07. Survival of Obligations.................................. 67 Section 8.08. Payment of Taxes......................................... 67 Section 8.09. Reimbursements by Indemnitees Generally.................. 67 ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally................................................ 67 Section 9.02. After-Tax Basis.......................................... 71 Section 9.03. Subrogation.............................................. 72 Section 9.04. Notice and Payment....................................... 72 Section 9.05. Refunds.................................................. 72 Section 9.06. Defense of Claims........................................ 73 Section 9.07. Survival of Obligations.................................. 73 Section 9.08. Effect of Other Indemnities.............................. 74 Section 9.09. Interest................................................. 74 ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs....................... 74 ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee.................. 77 ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant.................... 78 Section 12.02. Interest of Holders of Certificates..................... 79 ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents.................... 79 Section 13.02. Further Assurances...................................... 79 Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment.......................................... 79 ARTICLE 14 NOTICES Section 14.01. Notices................................................. 80 ARTICLE 15 REFINANCING Section 15.01. Refinancing............................................. 81 ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved].............................................. 83 Section 17.02. Collateral Account...................................... 84 Section 17.03. Counterparts............................................ 86 Section 17.04. No Oral Modifications................................... 86 Section 17.05. Captions................................................ 86 Section 17.06. Successors and Assigns.................................. 86 Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee................................ 86 Section 17.08. Severability............................................ 87 Section 17.09. Public Release of Information........................... 87 Section 17.10. Certain Limitations on Reorganization................... 87 Section 17.11. GOVERNING LAW........................................... 88 Section 17.12. Section 1110 Compliance................................. 88 Section 17.13. Reliance of Liquidity Providers......................... 88 ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality......................................... 88 SCHEDULE I Certificate Information SCHEDULE II Definitions SCHEDULE III Permitted Country List SCHEDULE IV Certain Amounts SCHEDULE V Mandatory Document Terms SCHEDULE VI Mandatory Economic Terms EXHIBIT A(1)(a)(i) Opinion of Lessee's Counsel (Certificate Closing Date) EXHIBIT A(1)(a)(ii) Opinion of Lessee's Counsel (Delivery Date) EXHIBIT A(1)(b)(i) Opinion of Lessee's Special Counsel (Certificate Closing Date) EXHIBIT A(1)(b)(ii) Opinion of Lessee's Special Counsel (Delivery Date) EXHIBIT A(2) Opinion of Indenture Trustee's Special Counsel EXHIBIT A(3)(i) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date) EXHIBIT A(3)(ii) Opinion of Owner Trustee's Special Counsel (Delivery Date) EXHIBIT A(4) Opinion of Pass Through Trustee's and Subordination Agent's Special Counsel EXHIBIT A(5)(a) Opinion of Liquidity Provider's Counsel EXHIBIT A(5)(b) Opinion of LC Bank's Counsel EXHIBIT A(5)(c) Opinion of Liquidity Provider's Special Counsel EXHIBIT A(5)(d) Opinion of LC Bank's Special Counsel EXHIBIT A(6) Opinion of Engine Manufacturer's Counsel EXHIBIT A(7) Opinion of Manufacturer's and AVSA's Counsel EXHIBIT A(8) Opinion of Special Aviation Counsel EXHIBIT B Form of Lease Agreement EXHIBIT C Form of Indenture EXHIBIT D Form of Trust Agreement EXHIBIT E Form of Purchase Agreement Assignment, Consent and Agreement, AVSA Consent and Agreement EXHIBIT F Form of Engine Warranty Assignment and Engine Consent PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) PARTICIPATION AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) dated as of June 15, 1998 (this "Agreement") among FEDERAL EXPRESS CORPORATION, a Delaware corporation (herein, together with its successors and permitted assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as owner trustee under the Trust Agreement referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Owner Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as indenture trustee under the Indenture referred to below (in such capacity as trustee, together with its successors and permitted assigns, the "Indenture Trustee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as pass through trustee of three separate Pass Through Trusts (in such capacity as trustee, together with its successors and permitted assigns, the "Pass Through Trustee"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, except as otherwise expressly stated herein, but solely as subordination agent (in such capacity as trustee, together with its successors and permitted assigns, the "Subordination Agent"). W I T N E S S E T H : WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article 1 hereof. WHEREAS, the Initial Owner Participant has entered into the Trust Agreement with the Owner Trustee in its individual capacity, substantially in the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner Trustee agrees, among other things, to hold the Lessor's Estate for the benefit of the Initial Owner Participant on the terms specified in the Trust Agreement, subject to the Lien of the Indenture. WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of Pass Through Certificates issued by each Pass Through Trust, an allocable amount of the proceeds of which offering will be used by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the Series and Maturity applicable thereto. WHEREAS, on the Certificate Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture for the benefit of the Pass Through Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the Subordination Agent on behalf of the Pass Through Trustee as evidence of the loans made by the Pass Through Trustee to the Owner Trustee, the proceeds of which loans will be deposited by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account. WHEREAS, concurrently with the execution and delivery hereof, (i) the Liquidity Provider will enter into two revolving credit agreements (each, a "Liquidity Facility"), one for the benefit of the holders of Pass Through Certificates of each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, each Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement. WHEREAS, the Certificates will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trustee for each of the Pass Through Trusts. WHEREAS, all of the outstanding Certificates will be secured by the Liquid Collateral prior to the Delivery Date, and any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date will be secured by the Liquid Collateral up to and including the Series C Prepayment Date. WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Trustee will be authorized and directed by the Initial Owner Participant: (a) on the Delivery Date, to purchase the Aircraft from AVSA; (b) on the Certificate Closing Date, to execute and deliver the Lease substantially in the form of Exhibit B hereto, pursuant to which, subject to the terms and conditions set forth in said Lease, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery Date, such lease to be effected by the execution and delivery on the Delivery Date of a Lease Supplement, in the form of Exhibit A to the Lease, covering the Aircraft and incorporating by reference all of the terms of the Lease; (c) on the Certificate Closing Date, to execute and deliver the Indenture, substantially in the form of Exhibit C hereto, for the benefit of the Holders from time to time of the Certificates, pursuant to which the Owner Trustee agrees, among other things, (A) to deposit, mortgage and pledge with the Indenture Trustee, as part of the Trust Indenture Estate, all of the Lessor's Estate but not Excepted Payments, (B) on the Certificate Closing Date, to issue Certificates substantially in the form set forth in Exhibit B to the Indenture, the proceeds of the sale of which will be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account until released in accordance with the terms hereof and of the Indenture, and (C) on the Delivery Date, to execute and deliver the Indenture and Security Agreement Supplement, substantially in the form of Exhibit A to the Indenture, covering the Aircraft and supplementing the Indenture; (d) on the Certificate Closing Date, to execute and deliver the Purchase Agreement Assignment, whereby the Lessee assigns to the Owner Trustee the right to purchase the Aircraft from AVSA and certain of the Lessee's rights and interests under the Purchase Agreement and the Consent and Guaranty to the extent that the same relate to the Aircraft (except to the extent reserved in said Purchase Agreement Assignment), which Purchase Agreement Assignment is to include as an annex a Consent and Agreement executed by the Manufacturer and the AVSA Consent and Agreement executed by AVSA, said Purchase Agreement Assignment, Consent and Agreement and AVSA Consent and Agreement to be substantially in the form of Exhibit E hereto; and (e) on the Certificate Closing Date, to execute and deliver the Engine Warranty Assignment, whereby the Lessee assigns to the Owner Trustee certain of the Lessee's rights and interests under the GTA to the extent that the same relate to the Engines (except to the extent reserved in the Engine Warranty Assignment), which Engine Warranty Assignment is to include as an annex an Engine Consent executed by the Engine Manufacturer, said Engine Warranty Assignment and Engine Consent to be substantially in the form of Exhibit F hereto. WHEREAS, on the Delivery Date pursuant to and subject to the terms and conditions of this Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty, the Owner Trustee will purchase, and receive title to, the Aircraft from AVSA and lease the Aircraft to the Lessee pursuant to the Lease. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Unless otherwise specifically provided herein, the definitions set forth in Schedule II hereto are incorporated herein for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms so defined. ARTICLE 2 ISSUANCE OF PASS THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES Section 2.01. Transfer of Funds. (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, on behalf of each Pass Through Trust, from an allocable amount of the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall purchase the Certificates specified for such Pass Through Trust on Schedule I hereto. For each Pass Through Trust, the Pass Through Trustee shall pay an amount equal to the principal amount of Certificates of the Series and Maturity that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture. The aggregate amount payable by the Pass Through Trustee pursuant to this Section 2.01(b) shall be payable by wire transfer or intra-bank transfer to the Indenture Trustee on behalf of the Owner Trustee. (c) On the Certificate Closing Date, the Indenture Trustee shall, on behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer, the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral Account pursuant to the Indenture. (d) On the Certificate Closing Date, the LC Bank shall issue the Letter of Credit. (e) On the Certificate Closing Date concurrently with the events specified in Section 2.01(b) hereof, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not parties thereto), the Lease (other than the Lease Supplement), the Indenture (other than the Indenture and Security Agreement Supplement), and the other documents listed in Section 4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, upon the request of the Owner Trustee, the Certificates as provided in Section 2.02 hereof. (f) The Closings shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Section 2.02. (a) Certificates. Subject to the satisfaction or waiver of the conditions set forth herein, on the Certificate Closing Date, the Initial Owner Participant will instruct the Owner Trustee to execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, the Certificates specified for such Pass Through Trust on Schedule I attached hereto, which (i) shall be issued in the principal amount and in the Series and Maturity set forth for such Certificate in Schedule I hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule I hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated on the Certificate Closing Date and shall bear interest from the Certificate Closing Date and (v) shall be registered in the name of the Subordination Agent on behalf of the Pass Through Trustee for such Pass Through Trust. (b) Transfer of Beneficial Interest. If on a date prior to the Delivery Date, the Lessee shall have identified one or more Owner Participants ready, willing and able to acquire the Beneficial Interest of the Initial Owner Participant in consideration for such Owner Participant's or Owner Participants' agreement to participate in the Lessor's payment of the Purchase Price for the Aircraft on the Delivery Date, the Initial Owner Participant shall transfer its Beneficial Interest to such Owner Participant or Owner Participants on such date (the "Transfer Date"). On the Transfer Date, the document amendments contemplated by Section 2.03(a) hereof (subject to the limitations set forth in such Section) shall be effected and such amended documents delivered. Section 2.03. Amendments on Delivery Date or Transfer Date. (a) Amendment and Restatement of Certain Documents. Upon any transfer by the Initial Owner Participant of its Beneficial Interest on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto shall enter into amendments and restatements of the Trust Agreement, the Lease, the Indenture and this Agreement, which amendments and restatements shall reflect such changes as shall have been requested by the Owner Participant, agreed to by the Lessee and, if modified in any material respect, as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or before the Delivery Date or the Transfer Date, as the case may be); provided, however, that in any event such amended and restated documents shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. The Lessee agrees to furnish to each Liquidity Provider and to Milbank, Tweed, Hadley & McCloy (the initial Liquidity Provider's special New York counsel) at its New York office, attention: Drew S. Fine, as soon as practicable but in no event less than 7 Business Days prior to the estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and complete copies of drafts of any such amended and restated Participation Agreement, amended and restated Lease Agreement and amended and restated Indenture. The Lessee further agrees to furnish to each Liquidity Provider and to the counsel identified in the preceding sentence (i) each and every subsequent draft of such documents and (ii) promptly following the execution thereof, true and complete copies of such documents. (b) Amendments to Certain Schedules. The percentages of Basic Rent, Stipulated Loss Value and Termination Value set forth on Schedules II, III and IV, respectively, of the Lease, the EBO Price and the schedule of principal payments on the Certificates set forth in Section 6.06 of the Indenture and Schedule I to each Certificate on the Certificate Closing Date have been calculated based upon a hypothetical owner's economic return and certain assumptions regarding the Delivery Date, Transaction Costs, tax law, Basic Term and certain other items (the "Assumptions"). If the Initial Owner Participant transfers its Beneficial Interest to one or more Owner Participants on the Delivery Date (as contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date), then, no later than 20 days following the Delivery Date (the "Reoptimization Date"), the Owner Trustee may elect to amend such Schedules to reflect the actual Owner's or Owners' Economic Return and any changes to the Assumptions. In connection with any such amendments, the Owner Trustee may increase or decrease the aggregate principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture, and may prepay part of the remaining Series C Certificates on the Series C Prepayment Date. The Lessee, on behalf of the Owner Trustee, shall provide written notice to the Indenture Trustee on the Reoptimization Date and any Adjustment Date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture and of the aggregate principal amount of the Series C Certificates, if any, which shall then be subject to prepayment on the Series C Prepayment Date pursuant to this Section 2.03(b). On the Reoptimization Date, any Adjustment Date, and on the Series C Prepayment Date in the event of any prepayment of such Series C Certificates, the Owner Trustee shall deliver and the Subordination Agent on behalf of the Pass Through Trustee of each Pass Through Trust shall accept delivery of an amended Schedule I to each Certificate containing such changed principal installments. The Owner Trustee will give not less than 10 days' notice of the Reoptimization Date. Any amendment to such Schedules shall not vary the Mandatory Economic Terms and on the Reoptimization Date the Lessee shall deliver a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other authorized officer of the Lessee certifying to such effect. If the Reoptimization Date or any Adjustment Date occurs later than the Delivery Date, the Lessee shall cause any required filing and recording of the affected documents with the Aeronautics Authority to be effected on such date. Section 2.04. Event of Loss Prior to Delivery Date. If, prior to delivery of the initial Lease Supplement, an Event of Loss occurs with respect to the Airframe initially contemplated to be sold by AVSA to the Owner Trustee as provided herein and to be leased under the Lease, the Lessee shall have the right at any time up to and including the Cut-Off Date by written notice to the Lessor and the Indenture Trustee to elect to substitute such Airframe with another airframe (the "Pre-Delivery Replacement Airframe"), provided, that the Pre-Delivery Replacement Airframe shall be an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 having a value, remaining useful life and utility at least equal to the Airframe with respect to which such Event of Loss has occurred. Upon the Lessee's election to replace the Airframe suffering an Event of Loss with the Pre-Delivery Replacement Airframe, the Pre-Delivery Replacement Airframe shall become the Airframe for purposes of the Operative Agreements. ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee at least three (3) Business Days' written or facsimile notice prior to the Delivery Date (which notice shall be effective only if received not later than 10:00 a.m. (New York City time) on the date that is at least three (3) Business Days prior to the Delivery Date), which Delivery Notice shall specify the amount of the Purchase Price, the amount of the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics Authority registration number for the Aircraft. Section 3.02. Commitments to Participate in Purchase Price. (a) Participation in Purchase Price. Subject to the terms and conditions of this Agreement, on the Delivery Date, (i) subject to the proviso to this Section 3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser amount as may then be held in the Collateral Account together with the Lessee Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for application to the Purchase Price as provided below, (ii) unless previously transferred on the Transfer Date, the Initial Owner Participant agrees to transfer its Beneficial Interest to the Owner Participant in consideration for the Owner Participant's participation in the Lessor's payment of the Purchase Price through an investment in the Lessor's Estate in an amount equal to the amount set forth in Ancillary Agreement I, (iii) subject to the proviso to this Section 3.02(a), the Lessee agrees to pay to the Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such amount as may then be held in the Collateral Account (the "Lessee Shortfall") as provided in Section 17.02(a) hereof, and (iv) pursuant to the Purchase Agreement as assigned pursuant to the Purchase Agreement Assignment, AVSA shall sell the Aircraft to the Owner Trustee and the Owner Trustee shall immediately thereafter lease the Aircraft to the Lessee pursuant to the Lease. In consideration for the assignment to the Owner Trustee by the Lessee under the Purchase Agreement Assignment of the Lessee's right to purchase the Aircraft for the remaining balance due under the Purchase Agreement and for the transfer of title to the Aircraft from AVSA to the Owner Trustee, the following cash payments will be made by wire transfer of immediately available funds on the Delivery Date: (A) by the Owner Trustee to AVSA, an amount equal to the remaining balance due to AVSA under the Purchase Agreement for the Aircraft, as evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount equal to the Purchase Price minus the cash payment to AVSA pursuant to clause (A) above, and (C) by the Indenture Trustee, on behalf of the Owner Trustee, if the Indenture Trustee is so instructed by the Lessee, to one or more Outstanding C Accounts, the excess (or a portion of the excess) of any amounts then held in the Collateral Account over the Debt Portion; provided, however, that if (1) the Delivery Date has been postponed, (2) the investments contemplated by Section 2.14(b) of the Indenture have been made, (3) such investments do not mature on the rescheduled Delivery Date and (4) the Lessee elects not to break such investments, then the Indenture Trustee shall not release amounts in the Collateral Account to the Owner Trustee and the Lessee shall accept as payment of the Purchase Price by the Owner Trustee an amount equal to the Owner Participant's Commitment and the Indenture Trustee shall pay to the Lessee at the end of the applicable investment period referred to in Section 2.14(b) of the Indenture an amount equal to the Debt Portion or such lesser amount as may then be held in the Collateral Account. After the Delivery Date, any amounts remaining in the Collateral Account shall secure the Secured Obligations relating to any Series C Certificates outstanding after the Delivery Date that are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture. (b) No Obligation to Increase Commitments; Delayed Delivery. (i) If the Indenture Trustee shall default in its obligation to make the amount of its Debt Portion available pursuant hereto, the Owner Participant shall have no obligation to make any portion of such Debt Portion available or to increase the amount of its Commitment, but the obligations of the Owner Participant shall nevertheless remain subject to the terms and conditions of this Agreement. (ii) Subject to the provisions of Section 3.03 hereof, if the closing of the transactions contemplated by the Operative Agreements shall not have been consummated by 2:00 p.m. (New York City time), or such earlier time as directed by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if instructed in writing by the Lessee, at the risk and expense of the Lessee, use its reasonable best efforts to cause the Owner Participant's Commitment to be invested and reinvested to the extent practicable at the direction received by it from the Lessee (with a copy to the Owner Participant), at the risk of the Lessee, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 2:00 p.m. (New York City time) the Owner Trustee shall use its reasonable best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Lessee's payment obligations, if any, to the Owner Participant pursuant to the next succeeding paragraph, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Lessee's written instructions. If for any reason (i) the Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Article 4 hereof or otherwise) on or before the third Business Day after the Scheduled Delivery Date (or earlier if requested by the Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00 p.m. (New York City time) on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date, the Owner Participant may cancel any funding arrangements made to fund its Commitment on the Scheduled Delivery Date but the Owner Participant's Commitment hereunder with respect to the Aircraft shall not be terminated thereby until the Cut-Off Date, whereupon the Owner Participant's Commitment hereunder shall terminate. On such third Business Day (or such earlier date) or the Cut-Off Date, as the case may be, or the earliest practicable Business Day thereafter, the Owner Trustee shall return the amounts held by it hereunder to the Owner Participant, provided that the Owner Trustee shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to the preceding paragraph and to obtain the proceeds therefrom in funds of the type originally received, and the Lessee shall pay interest on such funds to the Owner Participant at the full-term implicit lease rate (which rate shall not be less than the Owner Participant's cost of funds), such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to the Owner Participant in accordance with the terms hereof; provided that if any such funds are returned to the Owner Participant after 2:00 p.m. (New York City time) on any such date, such funds shall be deemed for purposes of this paragraph to have been returned on the next succeeding Business Day. The Lessee shall reimburse the Owner Trustee on demand for any loss incurred by the Owner Trustee as a result of the investment of funds by the Owner Trustee in accordance with the terms of this Section 3.02(b). Further, the Lessee shall indemnify the Owner Trustee and hold it harmless from and against any cost or expense the Owner Trustee may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Owner Trustee shall not be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. Section 3.03. Postponement of Delivery Date. (a) If no Owner Participant has committed to participate in the transactions contemplated to occur on the Scheduled Delivery Date or if an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available on the Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the Owner Trustee will promptly give each party confirmed facsimile notice thereof and the Lessee shall postpone the Delivery Date to a date not later than the Cut-Off Date. If no Owner Participant has committed to participate or an Owner Participant shall for any reason fail or refuse to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof on such postponed Delivery Date, the Lessee shall endeavor during such period to identify another equity investor to whom it can assign its Beneficial Interest. If the Lessee identifies an equity investor, the Lessee shall assign its interest in the Lessor's Estate as provided above. In case of any such conveyance (but subject to the satisfaction of the conditions precedent specified herein), the Indenture Trustee shall release the Debt Portion or such lesser amount as may then be held in the Collateral Account for application to the payments contemplated in the last sentence of Section 3.02(a) hereof, subject to the proviso to Section 3.02(a) hereof. For the avoidance of doubt, it is understood and agreed that if for any reason other than the failure of the Manufacturer or AVSA (A300s only) to deliver the Aircraft, the Lessee does not enter into the Lease Supplement with the Owner Trustee on or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the Pass Through Trustee agree that the Lessee shall purchase the Aircraft and assume all of the obligations of the Owner Trustee under the Certificates upon satisfaction of the requirements set forth in Section 4.02 hereof, as the same may be modified by the provisions of Section 7.11 hereof and as otherwise necessary to reflect a full recourse secured aircraft financing of the Lessee. (b) Release of Obligations. If the Delivery Date has not occurred on or prior to the Cut-Off Date (including by reason of the Aircraft not being completed and delivered, there being no Owner Participant committed to participate in the transactions contemplated to occur on the Delivery Date or by reason of an Owner Participant's failure to make the full amount of its Commitment available in accordance with the terms of Section 3.02 hereof and no transferee Owner Participant having been identified pursuant to Section 3.03(a) hereof), then, in such event, the Owner Trustee shall not purchase the Aircraft from AVSA, and subject to the last sentence of Section 3.03(a) hereof the parties to the Operative Agreements shall have no further obligations or liabilities under any of said Operative Agreements with respect to the Aircraft, including the obligation of the Owner Participant to participate in the payment of the Purchase Price, and such documents shall terminate and have no further force or effect with respect to the Aircraft; provided, however, that if the last sentence of Section 3.03(a) hereof does not apply the Lessee shall provide, no later than the Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates shall be prepaid on the 15th day following the Cut-Off Date as provided in Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided further, that (i) the Lessee's obligation to indemnify such parties to the extent provided in such documents, shall not be diminished or modified in any respect and (ii) the obligations of the Owner Trustee, the Indenture Trustee and the Lessee to return funds and pay interest, costs, expenses and other amounts thereon or in respect thereof as provided in Section 3.02 hereof shall continue. (c) Optional Postponement. Without limiting the provisions of Section 3.02(b) hereof, the Scheduled Delivery Date may be postponed from time to time (but in no event shall the Delivery Date be later than the Cut-Off Date) for any reason, other than pursuant to Section 3.03(a) hereof, if the Lessee gives the Owner Participant, the Indenture Trustee, the Owner Trustee and the Pass Through Trustee confirmed facsimile notice (or telephone notice followed by written confirmation) of such postponement and notice of the date to which the Delivery Date has been postponed, such notice of postponement to be received by each party no later than 11:00 a.m. (New York City time) on the Business Day preceding the Scheduled Delivery Date. Section 3.04. Closing. The closing with respect to the purchase and lease of the Aircraft on the Delivery Date shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. ARTICLE 4 CONDITIONS PRECEDENT Section 4.01. Conditions Precedent (Certificate Closing Date). The obligations of the Owner Trustee, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Certificate Closing Date are subject to the fulfillment to the satisfaction of such party (or waiver by such party), prior to or on the Certificate Closing Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligations of any party): (a) Certificates. (i) On the Certificate Closing Date, there shall have been duly issued and delivered by the Owner Trustee to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate, substantially in the form set forth in Exhibit B to the Indenture, duly authenticated, dated the Certificate Closing Date and registered in the name of the Subordination Agent, in the principal amounts, Series and Maturity, bearing the interest rate and the other economic terms specified in the Series Supplements and otherwise as provided in Section 2.04 of the Indenture. (ii) The Pass Through Certificates shall be registered under the Securities Act, any applicable state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act, and on the Certificate Closing Date, the "Certificates" (as defined in each of the Related Indentures) have been duly issued and delivered by the "Owner Trustee" (as defined in each of the Related Indentures) to the Subordination Agent on behalf of the Pass Through Trustee for each Pass Through Trust. (b) Legal Investment. On the Certificate Closing Date, no fact or condition shall exist under applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Initial Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Certificate Closing Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Certificate Closing Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Underwriters. The Underwriters shall have transferred the funds specified in Section 2.01(a) hereof and all conditions thereunder shall have been satisfied or waived. (d) Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Subordination Agent, as the case may be, of such documents shall have been delivered to the LC Bank, the Lessee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Trustee (provided that the sole chattel-paper original of each of the Lease and each Ancillary Agreement amendatory of the Lease, shall be delivered to the Indenture Trustee): (i) the Lease; (ii) the Indenture; (iii) the Purchase Agreement and the Consent and Guaranty; (iv) the GTA; (v) the Trust Agreement; (vi) the Intercreditor Agreement; (vii) the Liquidity Facility for each of the Pass Through Trusts for the Series A Certificates and the Series B Certificates; (viii) the Collateral Agreement; and (ix) the Letter of Credit (the original of such document to be delivered to the beneficiaries of the Letter of Credit only). (e) Approvals. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, which in the opinion of the Pass Through Trustee or the Indenture Trustee are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (f) Financing Statements. UCC financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and such financing statements shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of the Pass Through Trustee and the Underwriters, are necessary to perfect and protect such security interests and other interests. (g) Corporate Documents. Except when such Person is the delivering party, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following, in each case in form and substance satisfactory to it: (i) a copy of the certificate of incorporation and by-laws of the Lessee, certified by the Secretary or an Assistant Secretary of the Lessee as of the Certificate Closing Date, and a copy of the minutes of the regular meeting of the board of directors of the Lessee, certified as such as of the Certificate Closing Date by such Secretary or Assistant Secretary, duly authorizing the lease by the Lessee of the Aircraft under the Lease and the execution, delivery and performance by the Lessee of this Agreement, the Lease, the Pass Through Agreement, the Series Supplements, the other Operative Agreements to which the Lessee is or is to be a party and each other document to be executed and delivered by the Lessee in connection with the transactions contemplated hereby; (ii) a copy of the articles of association and by-laws and other instruments of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of this Agreement, the Trust Agreement and each of the other Operative Agreements to which it is or is to be a party, whether in its individual capacity or as Owner Trustee, and each other document to be executed and delivered by the Owner Trustee in connection with the transactions contemplated hereby; (iii) a copy of the articles of association and by-laws and other instruments of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Indenture Trustee of each of this Agreement, the Indenture and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Indenture Trustee in connection with the transactions contemplated hereby; (iv) a copy of the articles of association and by-laws and other instruments of the Pass Through Trustee, certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, the Series Supplements and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Pass Through Trustee in connection with the transactions contemplated hereby; (v) a copy of the articles of association and by-laws and other instruments of the Subordination Agent, certified by the Secretary or an Assistant Secretary of the Subordination Agent as of the Certificate Closing Date (or other like instruments satisfactory to the Lessee) and evidence authorizing the execution, delivery and performance by the Subordination Agent of this Agreement, the Intercreditor Agreement and each of the other Operative Agreements to which it is or is to be a party, and each other document to be executed and delivered by the Subordination Agent in connection with the transactions contemplated hereby; and (vi) such other documents, evidences, materials, and information with respect to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee as the Indenture Trustee, the Pass Through Trustee or the LC Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (h) Officer's Certificate of Lessee. On the Certificate Closing Date, the following statements shall be true, and the LC Bank, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Certificate Closing Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (i) Other Officer's Certificates. On the Certificate Closing Date, the following statements shall be true, and the Lessee, the LC Bank, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the Lessee, the LC Bank, the Indenture Trustee, the Subordination Agent and the Owner Trustee), and FSB and the Subordination Agent (in the case of the Lessee, the LC Bank, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee), signed by a duly authorized officer of SSB and FSB, respectively, dated the Certificate Closing Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Certificate Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens. (j) Legal Opinions. The Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Certificate Closing Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(i) hereto and addressed to the Underwriters, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Ray, Quinney & Nebeker, special counsel for the Indenture Trustee, in the form of Exhibit A(2) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(i) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) Ray, Quinney & Nebeker, special counsel for the Pass Through Trustee and the Subordination Agent, in the form of Exhibit A(4) hereto and addressed to the Underwriters, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (vi) Ruediger Sass, General Counsel to the Liquidity Providers, in the form of Exhibit A(5)(a) hereto, Ruediger Sass, General Counsel to the LC Bank, in the form of Exhibit A(5)(b) hereto, Milbank, Tweed, Hadley & McCloy, special counsel for the Liquidity Providers, in the form of Exhibit A(5)(c) hereto, and Milbank, Tweed, Hadley & McCloy, special counsel for the LC Bank in the form of Exhibit A(5)(d) hereto, each addressed to the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Lessee. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Other Agreements. The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been issued pursuant to the Series Supplements. The Lessee and the Underwriters shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. All conditions to the effectiveness of each Liquidity Facility shall have been satisfied or waived. (n) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements referred to in subparagraph (f) of this Section 4.01, or in connection with the issuance of the Certificates shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Certificate Closing Date which are then due and payable shall have been duly paid in full. (o) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Certificate Closing Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Certificate Closing Date. (p) Section 131.3 of the New York State Banking Law Filing. SSB shall have delivered evidence of its filing made with the New York Superintendent of Banking pursuant to Section 131.3 of the New York State Banking Law. Section 4.02. Conditions Precedent (Delivery Date). Subject to the last paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Delivery Date are subject to the fulfillment to the satisfaction of each party (or waiver by such party), prior to or on the Delivery Date, of the following conditions precedent (it being understood that receipt by the Lessee of any of the following documents shall not be a condition precedent to the obligation of any party): (a) Notice, Etc. Each party hereto shall have received a Delivery Notice pursuant to Section 3.01 hereof at least three (3) Business Days prior to the Delivery Date. (b) Legal Investment. No change shall have occurred after the date which is two days prior to the Certificate Closing Date in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of the Owner Participant or its special counsel, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee or their special counsel, would make it illegal for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, and no change in circumstances shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, to participate in the transactions to be consummated on the Delivery Date; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for the Owner Participant, the Indenture Trustee, the Subordination Agent or the Pass Through Trustee is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of the Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (c) Documents. The documents referred to in Section 4.01(d) hereof shall each be in full force and effect and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent and the Owner Participant (each acting directly or by authorization to its special counsel) and shall each be in full force and effect; there shall not have occurred any default thereunder, or any event which with the lapse of time or the giving of notice or both would be a default thereunder, and copies executed or certified as requested by the LC Bank, the Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant, as the case may be, of such documents shall have been delivered to the LC Bank, the Owner Participant, the Lessee, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee (provided that the sole chattel-paper original of the amended and restated Lease (whether delivered on the Transfer Date or the Delivery Date), the Lease Supplement and the Ancillary Agreement I shall be delivered to the Indenture Trustee): (i) this Agreement, as amended and restated as of the Delivery Date; (ii) the Lease, as amended and restated as of the Delivery Date; (iii) the Trust Agreement, as amended and restated as of the Delivery Date; (iv) the Indenture, as amended and restated as of the Delivery Date; (v) the Lease Supplement covering the Aircraft, dated the Delivery Date; (vi) the Indenture and Security Agreement Supplement covering the Aircraft, dated the Delivery Date; (vii) in the case of the Owner Participant only, the Tax Indemnity Agreement (unless delivered on the Transfer Date); (viii) the Ancillary Agreement I; (ix) the Invoice; (x) the Engine Warranty Assignment; (xi) the Engine Consent; (xii) the Purchase Agreement Assignment and the French Pledge Agreement with respect thereto; (xiii) AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; and (xiv) the Consent and Agreement and the AVSA Consent and Agreement; unless, in the case of each of the documents listed in clauses (i) through (iv) above they shall have been amended and restated as of and delivered on the Transfer Date. (d) Legal Opinions. The Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (acting directly or by authorization to its special counsel) shall have received from the following counsel their respective legal opinions in each case satisfactory to the Owner Participant, the Underwriters, the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, as to scope and substance (and covering such other matters as the recipient may reasonably request) and dated the Delivery Date: (i) Karen M. Clayborne, Senior Vice President and General Counsel of the Lessee, in the form of Exhibit A(1)(a)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Lessee, in the form of Exhibit A(1)(b)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iii) Bingham Dana LLP, special counsel for the Owner Trustee, in the form of Exhibit A(3)(ii) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (iv) Special counsel for the Owner Participant, and in-house counsel for the Owner Participant, each addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (v) counsel for the Engine Manufacturer, in the form of Exhibit A(6) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vi) Clifford Chance, special counsel for AVSA and the Manufacturer, in the form of Exhibit A(7) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; (vii) Daugherty, Fowler & Peregrin, special aviation counsel, in the form of Exhibit A(8) hereto and addressed to the Underwriters, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee, each Liquidity Provider and the Lessee; and (viii) in the case of the Owner Participant only, special tax counsel to the Owner Participant, addressed to the Owner Participant, with respect to certain tax matters. (e) Title, Airworthiness and Registration. On the Delivery Date, the following statements shall be true, and the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee shall have received evidence from the Lessee reasonably satisfactory to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee to the effect that: (i) the Owner Trustee has good and marketable title (subject to filing and recording of AVSA's FAA Bill of Sale with the Aeronautics Authority) to the Aircraft, free and clear of Liens, except the rights of the Owner Trustee and the Lessee under the Lease and the Lease Supplement covering the Aircraft, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the interest of the Certificate Holders created by the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft, which evidence shall include AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale and the Airbus Guaranty; (ii) the Aircraft has been duly certificated by the Aeronautics Authority as to type and airworthiness in accordance with the terms of the Operative Agreements; (iii) AVSA's FAA Bill of Sale, the amended and restated Lease and the Lease Supplement covering the Aircraft, the amended and restated Indenture and the Indenture and Security Agreement Supplement covering the Aircraft and the amended and restated Trust Agreement shall have been duly filed for recordation (or shall be in the process of being so duly filed for recordation) with the Aeronautics Authority pursuant to the Transportation Code; and (iv) application to the Aeronautics Authority for registration of the Aircraft in the name of the Owner Trustee shall have been duly made and the Lessee shall have temporary or permanent authority to operate the Aircraft. (f) Financing Statements. (i) a form UCC-3 financing statement to amend and restate each financing statement referred to in Section 4.01(f) hereof shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee as secured party, and a form UCC-1 financing statement covering all the security interests (and other interests) created by or pursuant to the Granting Clause of the Indenture shall have been executed and delivered by the Owner Trustee, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Holders, and concurrently with the transactions contemplated on the Delivery Date such UCC-3 financing statement and UCC-1 financing statement shall have been duly filed or duly submitted for filing in the State of Connecticut, and all other actions shall have been taken which, in the opinion of special counsel for the Pass Through Trustee or for the Underwriters, are necessary or desirable to maintain the perfection of the security interest created by or pursuant to the Granting Clause of the Indenture, and (ii) a UCC notice filing describing the Lease as a lease shall have been executed and delivered by the Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall name the Indenture Trustee as assignee of the Owner Trustee), and shall have been duly filed in the State of Tennessee. (g) Payments. The Owner Participant shall have made available its Commitment to the Owner Trustee and the other payments contemplated by Section 3.02 hereof shall have been made. (h) Report of Aircraft Expert. The Owner Participant shall have received a report prepared by BK Associates, Inc. addressed to the Owner Participant (with an abbreviated report to the Lessee) which report shall be in form and substance satisfactory to the Owner Participant. (i) Insurance. Each of the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee and the Owner Participant to establish that the insurance required by Article 13 of the Lease is in effect. (j) Payment of Taxes. (A) All taxes, fees, charges, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording and filing of all financing statements and the documents and instruments referred to in subparagraphs (e) and (f) of this Section 4.02, or in connection with the purchase of the Aircraft by the Owner Trustee and the making by the Owner Participant of its equity investment shall have been duly paid or caused to be paid in full; and (B) all sales or use taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements on the Delivery Date which are then due and payable shall have been duly paid in full. (k) No Indenture Event of Default. No Indenture Event of Default or Indenture Default has occurred and is continuing. (l) Event of Default; Default; Event of Loss. No Default or Event of Default under the Lease (assuming, for this purpose, that the provisions of Article 16 of the Lease had become operative on the Certificate Closing Date and not the Delivery Date) or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, shall have occurred or be in existence. (m) Governmental Compliance. All appropriate action required to have been taken by the FAA, the SEC, or any governmental or political agency, subdivision or instrumentality of the United States, prior to the Delivery Date in connection with the transactions contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals (collectively "permits") of such entities required to be in effect on the Delivery Date in connection with the transactions contemplated by this Agreement shall have been issued, and all such permits shall be in full force and effect on the Delivery Date. (n) Officer's Certificate of Lessee. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee, dated the Delivery Date, stating that: (i) the representations and warranties of the Lessee contained in the Operative Agreements to which it is a party (excluding the Tax Indemnity Agreement) and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which such officer will make no certification concerning the liability of the Lessee (if any), or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, no material adverse change has occurred in the financial condition, business or operations of the Lessee from that shown in the audited financial statements of the Lessee as of May 31, 1997 or the unaudited consolidated financial statements of the Lessee as of February 28, 1998 and nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Lessee to carry on its business or to perform its obligations under this Agreement and each other Operative Agreement to which it is or is to be a party; and (iii) no event has occurred and is continuing, or would result from the purchase, sale, mortgage, or lease of the Aircraft, which constitutes an Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Airframe or any Engine, or a Default or an Event of Default under the Lease. (o) Certificates of Owner Participant. (a) On the Delivery Date, the LC Bank, the Owner Trustee, the Pass Through Trustee, the Lessee and the Indenture Trustee (acting directly or by authorization to its counsel) shall have received the following in form and substance satisfactory to it: (i) a copy of the articles of incorporation and bylaws of the Owner Participant, certified by the Secretary or an Assistant Secretary of the Owner Participant as of the Delivery Date, and a copy of the resolutions of the board of directors of the Owner Participant, certified as such as of the Delivery Date by such Secretary or an Assistant Secretary, authorizing the execution and delivery by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which the Owner Participant is or is to be a party and each other document to be executed and delivered by the Owner Participant in connection with the transactions contemplated hereby. (b) On the Delivery Date, the following statements shall be true, and the LC Bank, the Lessee, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee shall have received a certificate from the Owner Participant, signed by a duly authorized officer of the Owner Participant dated the Delivery Date, stating that: (i) the representations and warranties of the Owner Participant contained in this Agreement, the Trust Agreement and any other Operative Agreement (excluding the Tax Indemnity Agreement) to which it is a party and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) no Lessor's Liens attributable to the Owner Participant exist; and (iii) no event has occurred and is continuing which constitutes or, with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default other than an Indenture Event of Default attributable to a Lease Event of Default. (p) Other Officer's Certificates. On the Delivery Date, the following statements shall be true, and the LC Bank, the Owner Participant, the Lessee, the Pass Through Trustee, the Owner Trustee, the Subordination Agent and the Indenture Trustee shall have received a certificate from each of SSB and the Owner Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee), FSB and the Indenture Trustee (in the case of the LC Bank, the Lessee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee), FSB and the Pass Through Trustee (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Owner Trustee) and FSB and the Subordination Agent (in the case of the LC Bank, the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee) signed by a duly authorized officer of SSB and FSB, respectively, dated the Delivery Date, stating with respect to SSB and the Owner Trustee, with respect to FSB and the Indenture Trustee, with respect to FSB and the Pass Through Trustee or with respect to FSB and the Subordination Agent, as the case may be, that: (i) the representations and warranties of SSB in its individual capacity and as Owner Trustee, of FSB in its individual capacity and as Indenture Trustee, of FSB in its individual capacity and as Pass Through Trustee or of FSB in its individual capacity and as Subordination Agent contained in this Agreement, the Lease, the Trust Agreement and the Indenture and in any certificate delivered pursuant hereto or thereto are true and correct on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); (ii) to the best of its knowledge, no event has occurred and is continuing, which constitutes or which, but for the lapse of time or the giving of notice, or both, would constitute, due to any action or omission on the part of SSB in its individual capacity or as Owner Trustee, of FSB in its individual capacity or as Indenture Trustee, of FSB in its individual capacity or as Pass Through Trustee, an Event of Default or an Indenture Event of Default or of FSB in its individual capacity or as Subordination Agent, an Event of Default or an Indenture Event of Default; and (iii) there are no Lessor's Liens attributable to the Owner Trustee or SSB and no Indenture Trustee's Liens affecting the Trust Indenture Estate or the Lessor's Estate or any part thereof. (q) Release of Debt Portion. Except as set forth in the proviso to Section 3.02(a) hereof, the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. (r) Outstanding C Accounts. Any amount withdrawn by the Indenture Trustee from the Collateral Account and not used to pay the Debt Portion of the Purchase Price of the Aircraft shall be deposited into one or more Outstanding C Accounts. (s) Officer's Certificate of Lessee Regarding Mandatory Economic Terms and Mandatory Document Terms. On the Delivery Date, or if earlier, the Transfer Date, in connection with the amendments contemplated by Section 2.03(a) hereof, the Lessee shall have delivered a certificate to the Pass Through Trustee and the Liquidity Providers signed by the Vice President and Treasurer or any other duly authorized officer of the Lessee stating that (i) the Operative Agreements which are amended and restated as of the Delivery Date or the Transfer Date, as the case may be, do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any substantive modification of such documents from those in effect on the Certificate Closing Date does not materially and adversely affect the Holders of Pass Through Certificates or any Liquidity Provider and such certification shall be true and correct. Notwithstanding anything else to the contrary in this Section 4.02, it shall not be a condition precedent to the obligations of the Indenture Trustee, the Pass Through Trustee or the Subordination Agent that the conditions in Section 4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill such condition precedent is not reasonably likely to materially adversely affect the holders of Pass Through Certificates and, in the event of such failure, there has been delivered to the Indenture Trustee written confirmation from both Moody's and S&P of the rating on any class of Pass Through Certificates. Section 4.03. Opinion of Special Aviation Counsel Upon Registration. Promptly upon the registration of the Aircraft and the filing and, where appropriate, recordation pursuant to the Transportation Code, of AVSA's FAA Bill of Sale, the Trust Agreement, the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), the Lessee shall cause Special Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an opinion as to (i) the due registration of the Aircraft in the name of the Owner Trustee, (ii) the due recording pursuant to the Transportation Code of AVSA's FAA Bill of Sale, the amended and restated Trust Agreement, the amended and restated Lease (with such Lease Supplement, the amended and restated Indenture and such Indenture and Security Agreement Supplement attached as exhibits), and the amended and restated Indenture (with such Indenture and Security Agreement Supplement attached as an exhibit), and (iii), subject to customary qualifications, the lack of any intervening documents with respect to the Aircraft. ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS Section 5.01. Conditions Precedent to Lessee's Obligations. The Lessee's obligation to participate in the transactions contemplated hereby on the Certificate Closing Date is subject to the conditions that, prior to or on the Certificate Closing Date, the Lessee shall have received the certificates and other documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (d), (g)(ii)-(v), (i), (j)(ii)-(vii) of Section 4.01 hereof and the Underwriters shall have made available the amounts required to be paid by them pursuant to Section 2.01 hereof, and the Lessee's obligation to participate in the transactions contemplated hereby on the Delivery Date is subject to the conditions that, on or prior to the Delivery Date, the Lessee shall have received the documents which are referred to in, or the opinions to be addressed to it under, as the case may be, paragraphs (c) and (d)(ii)-(vii) of Section 4.02 hereof and the Indenture Trustee shall have released the Debt Portion from (or such lesser amount as may then be held in) the Collateral Account. ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01. Lessee's Representations and Warranties. The Lessee represents and warrants to the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee), each Liquidity Provider and the Indenture Trustee (in its individual capacity and as Indenture Trustee) that, on the date hereof and as of the Certificate Closing Date and the Delivery Date (unless any such representation is specifically made as of one date): (a) the Lessee is a corporation duly organized and validly existing and is in good standing under the laws of the State of Delaware with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) in Memphis, Tennessee, and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Lessee require such qualification; (b) the Lessee has full power, authority and legal right to conduct its business and operations as currently conducted and to own or hold under lease its Properties and to enter into and perform its obligations under this Agreement, the other Operative Agreements to which it is a party, the Pass Through Agreement and the Series Supplements (the "Lessee Documents"); (c) the Lessee is an "air carrier" within the meaning of the Transportation Code and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code holding an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect; (d) the Lessee possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted and each such permit is in full force and effect; (e) the execution, delivery and performance of the Lessee Documents by the Lessee have been duly authorized by all necessary corporate action on the part of the Lessee and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and each such document has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by the Lessee and constitutes (or will constitute, as the case may be) the legal, valid and binding obligations of the Lessee enforceable against it in accordance with the terms 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 enforceability is considered in a proceeding in equity or at law); (f) 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 (other than the SEC) is required for the execution, delivery or performance by the Lessee of the Lessee Documents or for the use and maintenance of the Aircraft except for such registrations, applications and recordings referred to in the opinions of Special Aviation Counsel delivered or to be delivered pursuant to Sections 4.02(d)(iii) and 4.03 hereof and except for the filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of which shall have been duly obtained or made and shall be in full force and effect on and as of the Certificate Closing Date or the Delivery Date, or as contemplated by said Sections; (g) neither the execution, delivery or performance by the Lessee of the Lessee Documents 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 (other than the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty and the Engine Consent which will be executed on or prior to the Delivery Date) or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Lessee or any order, writ, injunction or decree of any court or governmental authority against the Lessee or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Lessee 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; (h) there are no pending or, to the knowledge of the Lessee, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Lessee) against or affecting the Lessee or any of its Property before or by any court or administrative agency which (A) involve the Aircraft, (B) except for the matters described (i) under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in the Lessee's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (ii) in the Lessee's Current Report on Form 8-K dated June 11, 1997, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the consolidated financial condition, business or operations of the Lessee, if adversely determined, would materially and adversely affect the consolidated financial condition, business or operations of the Lessee, or (C) if adversely determined would adversely affect the ability of the Lessee to perform its obligations under the Lessee Documents; (i) the Lessee has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Lessee (other than assessments the payment of which is being contested in good faith by the Lessee), and the Lessee has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Lessee's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Lessee, as to which no representation is made concerning the Lessee's liability (if any) or the effect of any adverse determination upon the Lessee's consolidated financial condition); (j) except for (A) the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code to be accomplished by filing with the FAA, of AVSA's FAA Bill of Sale, the Trust Agreement, the Affidavits and the Application, (B) the filing with and, where appropriate, recordation by the FAA pursuant to the Transportation Code of the Indenture, the Indenture and Security Agreement Supplement covering the Aircraft, the Lease and the Lease Supplement covering the Aircraft, (C) the filing of the financing statements referred to in Sections 4.01(f) and 4.02(f) hereof and (D)(x) on the Certificate Closing Date, the taking of possession by the Indenture Trustee of the Liquid Collateral and maintaining possession by the Indenture Trustee thereof as contemplated in Section 2.14(a) of the Indenture and (y) on the Delivery Date, the taking of possession by the Indenture Trustee of the original counterpart of the Lease and the Lease Supplement covering the Aircraft, no further action, including any filing or recording of any document, is necessary or advisable in order (i) to establish the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or (ii) to perfect the first security interest in and mortgage Lien on the Trust Indenture Estate in favor of the Indenture Trustee; (k) on the Delivery Date, the Owner Trustee has received good and marketable title to the Aircraft, free and clear of all Liens, except the rights of the Lessee under the Lease and the Lease Supplement, the rights of the Indenture Trustee under the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement; (l) the Lessee has heretofore delivered to the Owner Participant true and correct copies of the Lessee's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998, and of the audited consolidated balance sheet of the Lessee for the fiscal year ended May 31, 1997 and the unaudited consolidated balance sheets of the Lessee as of August 31, 1997, November 30, 1997 and February 28, 1998, and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the fiscal year and interim reporting periods ended on such dates, accompanied (except in the case of such interim reporting periods) by a report thereon containing opinions without qualification, except as therein noted, by Arthur Andersen LLP, independent public accountants; said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Lessee as of such dates and the results of its operations and cash flows for such periods and such Annual Report, Quarterly Reports and financial statements did not, as of their respective dates of filing with the SEC, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading; (m) with respect to ERISA: (i) none of the Pension Plans (as defined at the end of this Section 6.01(m)) nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit Guaranty Corporation (together with any successor agency or instrumentality thereto, the "PBGC") pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Pension Plan or related trust and neither the Lessee nor any ERISA Affiliate (as defined at the end of this Section 6.01(m)) has incurred or could reasonably be expected to incur any material liability with respect to a Pension Plan under Section 4062, 4063, 4064 or 4069 of ERISA; (ii) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Pension Plan which have resulted or could reasonably be expected to result in any material liability of the Lessee or any ERISA Affiliate; (iii) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Pension Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Pension Plans; (iv) neither the Lessee nor any ERISA Affiliate has failed to make any contribution or payment to any Pension Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (v) all Pension Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code; (vi) neither the Lessee nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; (vii) to the best of the Lessee's knowledge, neither the Lessee nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Lessee to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA; and (viii) assuming the truth of the representations contained in Section 7.03(a)(viii) hereof and compliance with Section 10.06 of the Indenture, the execution and delivery of this Agreement and the other Operative Agreements and the consummation of the transactions contemplated hereby and thereby will not involve any transaction which is prohibited by Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. No part of the funds to be used by the Lessee in satisfaction of its obligations under this Agreement or any other of the Operative Agreements to which the Lessee is a party or to which the Lessee is bound are the assets of any employee benefit plan subject to Title I of ERISA, or any individual retirement account or an employee benefit plan subject to Section 4975 of the Code; as used in this Section 6.01(m), the term "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and which is maintained, or contributed to, by the Lessee or any ERISA Affiliate, and the term "ERISA Affiliate" means any entity which together with the Lessee would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; (n) the Lessee is a Citizen of the United States; (o) except for the filings referred to in Sections 4.01(f), 4.02(e) and 4.02(f) hereof, no governmental approval of any kind is required of the Owner Participant or for the Owner Participant's execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of the Lessee, the nature of the Aircraft or the Lessee's proposed operations or use of the Aircraft; (p) on the Delivery Date, all premiums with respect to the insurance required to be provided by the Lessee on or prior to the Delivery Date under Article 13 of the Lease have been paid by the Lessee; (q) on the Delivery Date, all sales or use taxes relating to the sale of the Aircraft by AVSA to the Owner Trustee which are then or were theretofore due shall have been paid; (r) the Lessee is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Lessee is a party or by which it or any of its Properties or assets may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Lessee or its ability to perform any of its obligations under the Lessee Documents; (s) no Default or Event of Default or Event of Loss or event, which with the passage of time or if continued unremedied or unaltered would constitute an Event of Loss, has occurred or exists; (t) on the Delivery Date, the Aircraft will be in such condition so as to enable the airworthiness certificate of such Aircraft to be in good standing under the Transportation Code; the Aircraft will have been duly certificated by the FAA as to type and airworthiness; there will be in effect with respect to the Aircraft a current and valid airworthiness certificate issued by the FAA pursuant to the Transportation Code; and there is no fact known to the Lessee which materially adversely affects the value, utility or condition of the Aircraft; (u) on the Certificate Closing Date and the Delivery Date, the Lessee shall not be in default in the performance of any term or condition of the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment and the GTA and the aggregate amount of loans shall not exceed the Debt Portion; (v) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended; (w) on the Delivery Date, the Aircraft will, upon delivery, be fully equipped to operate in commercial service and will comply with all governmental requirements governing such service; and (x) there are no broker's or underwriter's fees payable on behalf of the Lessee in connection with the transactions contemplated in the Operative Agreements other than those of the Underwriters and First Chicago Leasing Corporation referred to in Article 10 hereof. Section 6.02. Offering by Lessee. The Lessee represents and warrants that it has authorized no one to act on its behalf in connection with the offer or sale of any interest in the Lessor's Estate or the Trust Agreement other than First Chicago Leasing Corporation. Neither the Lessee nor, based on representations of First Chicago Leasing Corporation, anyone acting on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or similar interests, for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Participant and no more than 50 other accredited investors (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended). Section 6.03. Certain Covenants of Lessee. The Lessee covenants and agrees with the Owner Participant, the Owner Trustee (in its individual capacity and as Owner Trustee), the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) and the Indenture Trustee (in its individual capacity and as Indenture Trustee) as follows: (a) The Lessee will cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, the Lease and the Lease Supplement and the other Operative Agreements to which it is a party. Without limiting the generality of this Section 6.03(a), the Lessee will take, or cause to be taken, at the Lessee's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of the Indenture, each Indenture and Security Agreement Supplement, the Lease, each Lease Supplement and any financing statements or other instruments as may be necessary, or as requested by the Indenture Trustee and appropriate, to maintain the perfection of the first security interest and the Lien created by the Indenture, and the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties, or if the Lessee cannot take, or cause to be taken, such action, will furnish to the Indenture Trustee and the Owner Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable either of them to take such action at the Lessee's cost and expense in a timely manner. (b) From and after the Delivery Date, the Lessee shall maintain the certificates referred to in Section 7.01 of the Lease and shall cause the Aircraft to be duly registered, and at all times to remain duly registered, in the name of the Owner Trustee, under the Transportation Code; provided, however, that the Owner Participant, the Owner Trustee and the Indenture Trustee agree that, so long as no Default or Event of Default shall have occurred and be continuing, if at any time after December 31, 2004 the Lessee has requested their consent to the registration of the Aircraft in the name of the Owner Trustee (or, if appropriate, in the name of the Lessee or a sublessee as a "lessee" or a "sublessee"), at the Lessee's expense, in a country in which a sublessee could be located under the provisions of Section 7.02(a)(i) of the Lease with which the United States then maintains normal and full diplomatic relations, upon receipt by the Owner Participant, the Owner Trustee and the Indenture Trustee of the assurances and opinion described below, none of them shall unreasonably withhold their consent to such change in registration (it being agreed, without limitation, that the inability of the Lessee to deliver such assurances or such opinion shall constitute reasonable grounds to withhold such consent). As a condition to any change in the registration of the Aircraft, the Owner Participant, the Owner Trustee in its individual and trust capacities, and the Indenture Trustee shall have received: (i) assurances satisfactory to them: (A) to the effect that the insurance provisions of the Lease have been and will be complied with and are and shall be in full force and effect upon such change of registry; (B) as to the continuation of the Lien of the Indenture as a first priority, duly perfected Lien on the Aircraft; (C) that the Owner Trustee's right, title and interest in and to the Aircraft is recognized and fully enforceable in the new jurisdiction of registry, that the rights of the Owner Trustee in and to the Aircraft will not be impaired in such new jurisdiction of registry and that the new jurisdiction of registry will give effect to the title and registry of the Aircraft therein substantially to the same extent as does the Government; (D) that such new country of registry (x) would provide substantially equivalent protection for the rights of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y)(i) if such change in registration is made other than in connection with a sublease, imposes maintenance standards at least comparable to those of the FAA, and (ii) if such change in registration is made in connection with a sublease permitted under Section 7.02(a)(i) of the Lease, imposes maintenance standards in conformity with those set forth in Section 7.02(a)(i) of the Lease; (E) that import and export certificates and any exchange permits necessary to allow all Rent and other payments provided for under the Lease, if required, shall have been procured at the Lessee's own cost and expense by the Lessee; (F) that the Lessee shall have effected or caused to be effected at the Lessee's own cost and expense all recordings and filings that are required to perfect the Lien of the Indenture; (G) to the effect that the original indemnities (and any additional indemnities for which the Lessee is then willing to enter into a binding agreement to indemnify) in favor of the Owner Participant, the Owner Trustee (in its individual capacity and as trustee under the Trust Agreement), the Indenture Trustee (in its individual capacity, and as trustee under the Indenture), the Pass Through Trustee (in its individual capacity, and as trustee under the Pass Through Agreement) and the other Indemnitees under this Agreement, the Indenture, the Pass Through Agreement and (in the case of the Owner Participant only) the Tax Indemnity Agreement, afford each such party substantially the same protection as provided prior to such change of registry; (H) that such change will not result in the imposition of, or increase in the amount of, any Tax for which the Lessee has not agreed to indemnify the Owner Participant, the Indenture Trustee, the Pass Through Trustee, the Owner Trustee (or any successor, assign or Affiliate thereof) and the Trust Estate; (I) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant; (J) of the payment by the Lessee of any reasonable fees and expenses of the Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee in connection with such change of registry, including any reasonable attorneys' fees and expenses; and (K) that duties and tariffs, if applicable, shall have been paid for by the Lessee; (ii) a favorable opinion of counsel (reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Owner Participant) in the new jurisdiction of registry, addressed and reasonably satisfactory to such parties in scope, form and substance, to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction against the Lessee, any sublessee, the Owner Trustee and the Indenture Trustee, respectively; (B) that it is not necessary for the Owner Participant, the Owner Trustee, the Indenture Trustee or the Pass Through Trustee to register or qualify to do business or meet other requirements not already met in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of the Indenture or the Lease) and the exercise of any rights or remedies with respect to the Aircraft pursuant to the Lease or the Indenture or in order to maintain such registration and the Lien of the Indenture; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(D)(x) of this Section 6.03) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided in the Indenture and the Lease; (D) that there is no tort liability of the beneficial owner, record owner, lessor or mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such owner, lessor or mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant and the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Owner Participant, the Indenture Trustee and the Owner Trustee, in its individual capacity, is provided, at the Lessee's expense, to cover such risk and the Lessee undertakes to keep such insurance in full force and effect); (E) that the laws of such jurisdiction will not impair the rights of the Lessor in and to the Aircraft and (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee and the Owner Participant covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States dollars for the loss of use of the Aircraft in the event of such requisition; (F) that the Owner Trustee's title to the Aircraft is recognized and fully enforceable in such jurisdiction, that such jurisdiction will give effect to the title of the Aircraft therein substantially to the same extent as does the Government, and that the Lien of the Indenture shall continue as a first priority, duly perfected lien on the Aircraft; and (G) to such further effect with respect to such other matters as the Owner Participant, the Owner Trustee, or the Indenture Trustee may reasonably request. If following any reregistration of the Aircraft, the Aircraft is located outside the United States, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any inspection or appraisal required or permitted under the Operative Agreements. Such obligation shall apply only with respect to one inspection or appraisal in any calendar year unless an Event of Default shall have occurred and be continuing. (c) The Lessee shall promptly file any reports, or furnish to the Owner Trustee and the Owner Participant such information as may be required to enable the Owner Trustee and the Owner Participant timely to file any reports required to be filed by the Owner Trustee as the Lessor and the Owner Participant under the Lease with any governmental authority. (d) The Lessee will cause the Special Aviation Counsel to file, and where appropriate record, on the Delivery Date, AVSA's FAA Bill of Sale, the Lease, the Lease Supplement, the Trust Agreement, the Indenture and the Indenture and Security Agreement Supplement. The following documents shall be filed and, where appropriate, recorded on the Delivery Date with the Aeronautics Authority in the following order of priority: first, AVSA's FAA Bill of Sale, second, the Application, with the Trust Agreement and the Affidavits, third, the Indenture with the Indenture and Security Agreement Supplement attached thereto, and fourth, the Lease with the Lease Supplement, the Indenture and the Indenture and Security Agreement Supplement attached thereto. (e) The Lessee will furnish to the Owner Participant, the Owner Trustee and the Indenture Trustee annually after the execution of this Agreement, by March 15 of each year, commencing with the year 1999, an opinion, reasonably satisfactory to the Owner Participant and the Indenture Trustee, of Special Aviation Counsel, or other counsel specified from time to time by the Lessee acceptable to the Lessor and the Indenture Trustee: (i) stating either (1) that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and re-filing of the Lease, the Indenture, the Trust Agreement, and any supplements to any of them and any financing statements, continuation statements or other instruments, and all other action has been taken, as is necessary to maintain the Owner Trustee's title to and interest in the Aircraft and the Lessor's Estate as against the Lessee and any third parties and to maintain the perfection of the security interests created by said documents and reciting the details of such action, or (2) that in the opinion of such counsel no such action is necessary to maintain such title or the perfection of such security interests; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain such title and the perfection of such security interests (which the Lessee agrees timely to take); and (iii) stating that the Owner Trustee is the owner of legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by the Indenture and such as are permitted by the Lease and the Indenture. (f) The Lessee shall at all times maintain its corporate existence except as permitted by Section 6.03(g) hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. (g) The Lessee shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Lessee as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a U.S. Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee, the Owner Participant and the Owner Trustee all of the Lessee's obligations hereunder and under the other Operative Agreements, and each other document contemplated hereby or thereby and the Lessee delivers such instrument to the Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an opinion from outside counsel to the Lessee which counsel shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee and which opinion shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such merger, consolidation, conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 6.03(g), that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Agreement and the Lease and each other Operative Agreement and each other document contemplated hereby or thereby; provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Lessee and the satisfaction of the conditions specified in this Section 6.03(g), the successor corporation formed by such consolidation or into which the Lessee is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement and the Lease and each other Operative Agreement and any other document contemplated hereby and thereby to which the Lessee is a party with the same effect as if such successor corporation had been named as the Lessee herein and therein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.03(g) from its liability hereunder or under the other Operative Agreements. Nothing contained herein shall permit any lease, sublease, or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (h) The Lessee agrees to give prompt written notice to the Owner Participant and the Indenture Trustee of any change in the address of its chief executive office (as such term is used in Section 9-103(3) of the Tennessee UCC) or of any change in its corporate name. (i) The Lessee agrees to furnish to the Owner Participant, the Lessor and the Indenture Trustee: (A) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Lessee, a consolidated balance sheet as of the end of such fiscal year, and the related consolidated statements of income, common stockholders' equity, retained earnings and cash flows of the Lessee for the fiscal year then ended as prepared and certified by the Lessee's independent certified public accountants, including their opinion; (B) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee; (C) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Lessee to its stockholders; (D) promptly after filing with the SEC, copies of the Lessee's Annual Reports on Form 10-K (including all corresponding annual reports to shareholders), Quarterly Reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Lessee with any securities exchange or with the SEC; (E) promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Lessee obtaining actual knowledge of any condition or event which constitutes a Default or any officer of the Lessee obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto; and (F) from time to time, such other financial information as the Lessor, the Owner Participant or the Indenture Trustee may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (A) above, the Lessee shall deliver to the Lessor, the Owner Participant, the Pass Through Trustee and the Indenture Trustee a certificate of the Lessee, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Lessee, stating that the signer, or an employee reporting to same, is familiar with the relevant terms of this Agreement and the Lease and the signer has reviewed, or has caused to be made under such Person's supervision a review of, the activities of the Lessee and that, to the best of his or her knowledge, there does not exist any Default or any Event of Default or if a Default or an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Lessee has taken or proposes to take with respect thereto. Section 6.04. Survival of Representations and Warranties. The representations and warranties of the Lessee provided in Sections 6.01 and 6.02 hereof and in any other Operative Agreement shall survive the Closings hereunder and the expiration or other termination of this Agreement and the other Operative Agreements. ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS Section 7.01. Acquisitions and Offerings of Interests in Lessor's Estate. (a) [Reserved.] (b) Owner Participant (other than Initial Owner Participant). The Owner Participant represents and warrants that its interest in the Lessor's Estate and the Trust Agreement was acquired by it for its own account and not with a view to resale or distribution thereof; provided, however, that the disposition by the Owner Participant of its interest in the Lessor's Estate and the Trust Agreement shall, subject to the terms and provisions of Article 5 of the Trust Agreement, at all times be within its control and the foregoing representation shall not limit the Owner Participant's right to transfer or sell such interests pursuant to the terms of this Agreement. The Owner Participant nor anyone else authorized to act on its behalf has directly or indirectly offered any interest in the Lessor's Estate or the Trust Agreement, or in any similar security, for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant further represents and warrants that neither it nor anyone authorized to act on its behalf has made or will make any offer, solicitation or sale of any interest in the Lessor's Estate or the Trust Agreement in violation of the provisions of Section 5 of the Securities Act of 1933, as amended. No representation in this Section 7.01(b) shall include any action or inaction of the Lessee, First Chicago Leasing Corporation, the Subordination Agent, the Underwriters or any Affiliate of any thereof whether or not purportedly on behalf of the Owner Trustee, the Owner Participant or any of their Affiliates. (c) Owner Trustee. The Owner Trustee represents and warrants, both in its individual capacity and as trustee, that neither it nor anyone acting on its behalf (i) has directly or indirectly offered or will directly or indirectly offer any interest in the Lessor's Estate, or in any similar security, for sale to, or solicited any offer to acquire any of the same from anyone (other than the Owner Participant) and (ii) except as contemplated in Section 8.02(a) of the Indenture, shall own Certificates. Section 7.02. Citizenship. (a) Generally. Each of the Owner Trustee, in its individual capacity and as Owner Trustee, and the Owner Participant severally represents and warrants that it is or will be a Citizen of the United States on the Delivery Date. If the Owner Participant or the Owner Trustee in its individual capacity does not comply with the requirements of this Section 7.02, the Owner Trustee, the Indenture Trustee and the Owner Participant hereby agree that a Default or an Event of Default shall not be deemed to have occurred and be continuing under the Lease due to non-compliance by the Lessee with the registration requirements in the Lease occasioned by the noncompliance of the Owner Participant or the Owner Trustee. (b) Owner Trustee. The Owner Trustee, in its individual capacity, covenants that if at any time it shall have actual knowledge that it has ceased to be a Citizen of the United States, it will resign immediately as the Owner Trustee if such citizenship is necessary under the Transportation Code as in effect at such time or, if it is not necessary under the Transportation Code as in effect at such time, if it is informed in writing by the Lessee, the Indenture Trustee or the Owner Participant that such lack of United States citizenship would have any adverse effect on the Lessee, the Indenture Trustee, the Holders or the Owner Participant. The Owner Trustee, in its individual capacity, further covenants that if at any time it appears reasonably probable that it will cease to be a Citizen of the United States based on information that is (i) known to a Responsible Officer or (ii) generally known to the public, it will promptly so notify, to the extent permitted by law, all parties to this Agreement. (c) Owner Participant. The Owner Participant agrees, solely for the benefit of the Lessee, the Pass Through Trustee, the Indenture Trustee and the Owner Trustee, that if at any time when the Aircraft is registered or the Lessee proposes to register the Aircraft in the United States (i) it shall cease to be, or believes itself likely to cease to be, a Citizen of the United States and (ii) the Aircraft shall or would therefore become ineligible for registration in the name of the Owner Trustee under the Transportation Code and regulations then applicable thereunder, then the Owner Participant shall give notice thereof to the Lessee and the Indenture Trustee and shall (at its own expense and without any reimbursement or indemnification from the Lessee) immediately (and in any event within a period of 15 days) (x) effect a voting trust or other similar arrangement, (y) transfer in accordance with the terms of this Agreement and the Trust Agreement all its rights, title and interest in and to such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any other alternative action that would prevent any deregistration, or maintain the United States registration, of the Aircraft. It is agreed that the Owner Participant shall be liable to pay promptly on request (A) to each of the other parties hereto and to each Holder any damages actually suffered by any such other party or Holder as the result of the representation and warranty of the Owner Participant in the first sentence of Section 7.02(a) hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the Indenture Trustee and the Pass Through Trustee for any damages actually incurred by the Lessee, the Indenture Trustee and the Pass Through Trustee as a result of the Owner Participant's failure to comply with its obligations pursuant to the first sentence of this Section 7.02(c). Each party hereto agrees, upon the request and at the sole expense of the Owner Participant, to cooperate with the Owner Participant in complying with its obligations under the provisions of the first sentence of this Section 7.02(c). Section 7.03. Representations, Warranties and Covenants of Owner Participant. (a) Representations, Warranties and Covenants. In addition to and without limiting its other representations and warranties provided for in this Article 7, the Owner Participant (other than the Initial Owner Participant) represents and warrants as of the Delivery Date that: (i) it is a corporation duly incorporated and validly existing in good standing under the laws of the state of its jurisdiction and it has full power, authority and legal right to carry on its present business and operations, to own or lease its Properties and to enter into and to carry out the transactions contemplated by this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been duly authorized by all necessary corporate action on its part and, assuming the accuracy of the Lessee's representations in Section 6.01(o) hereof, do not require any governmental approvals that would be required to be obtained by the Owner Participant; (iii) based on the representations, warranties and covenants contained in Sections 6.01(m)(viii) and 6.02 hereof and compliance with Section 10.06 of the Indenture, neither the execution, delivery or performance by the Owner Participant of this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party 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 applicable to the Owner Participant or the charter documents, as amended, or bylaws, as amended, of the Owner Participant or any order, writ, injunction or decree of any court or governmental authority against the Owner Participant or by which it or any of its Properties is bound or any indenture, mortgage or contract or other agreement or instrument to which the Owner Participant 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; (iv) this Agreement, the Tax Indemnity Agreement, the Trust Agreement and the other Operative Agreements to which it is or is to be a party have been or on the Delivery Date will be duly executed and delivered by the Owner Participant and constitute or on the Delivery Date will constitute the legal, valid and binding obligation of the Owner Participant enforceable against it in accordance with their terms 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 (regardless of whether enforceability is considered in a proceeding in equity or at law); (v) to the best of its knowledge, it is not in default under any mortgage, deed of trust, indenture, lease or other instrument or agreement to which the Owner Participant is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Owner Participant or an adverse effect on the ability of the Owner Participant to perform its obligations under this Agreement and the other Operative Agreements to which it is or is to be a party; (vi) there are no pending or, to the knowledge of the Owner Participant, threatened actions, suits, investigations or proceedings against the Owner Participant before any court, administrative agency or tribunal which are expected to materially adversely affect the ability of the Owner Participant to perform its obligations under any of the Operative Agreements to which it is or is to be a party, and the Owner Participant knows of no pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in connection with the transactions contemplated by the Operative Agreements; (vii) neither the execution and delivery by it of this Agreement, the Tax Indemnity Agreement, the Trust Agreement or the other Operative Agreements to which it is or is to be a party nor the performance of its obligations hereunder or thereunder requires the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency that would be required to be obtained or taken by the Owner Participant except for filings contemplated by this Agreement; (viii) no part of the funds to be used by it to acquire the interests to be acquired by the Owner Participant under this Agreement constitutes assets (within the meaning of ERISA and any applicable rules and regulations) of any employee benefit plan subject to Title I of ERISA or of any plan or individual retirement account subject to Section 4975 of the Code; (ix) it is a "U.S. Person" as defined in Section 7701(a)(30) of the Code and is not a tax resident of another country; and (x) it has a consolidated tangible net worth of not less than $75,000,000. Notwithstanding the foregoing or anything else contained in this Agreement, the Owner Participant makes no representation or warranty in this Agreement with respect to laws, rules or regulations relating to aviation or to the nature or use of the equipment owned by the Owner Trustee, other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable aviation law. (b) Lessor's Liens. The Owner Participant further represents, warrants and covenants that there are no Lessor's Liens attributable to it (or an Affiliate thereof) and that there will not be any Lessor's Lien attributable to it (or an Affiliate thereof) on the Delivery Date. The Owner Participant agrees with and for the benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee that the Owner Participant will, at its own cost and expense, take such action as may be necessary (by bonding or otherwise, so long as neither the Lessee's operation and use of the Aircraft nor the validity and priority of the Lien of the Indenture is impaired) to duly discharge and satisfy in full, promptly after the same first becomes known to the Owner Participant, any Lessor's Lien attributable to the Owner Participant (or an Affiliate thereof), provided, however, that the Owner Participant shall not be required to discharge or satisfy such Lessor's Lien which is being contested by the Owner Participant in good faith and by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or the Trust Indenture Estate or any interest in any thereof or otherwise materially adversely affect the validity or priority of the Lien of the Indenture. (c) Indemnity for Lessor's Liens. The Owner Participant agrees to indemnify and hold harmless the Lessee, the Indenture Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee or the Pass Through Trustee as the result of the failure of the Owner Participant to discharge and satisfy any Lessor's Liens attributable to the Owner Participant (or an Affiliate thereof) and required to be discharged as described in Section 7.03(b) hereof. (d) Assignment of Interests of Owner Participant. The Owner Participant agrees that it will not assign, convey or otherwise transfer any of its right, title or interest in and to the Operative Agreements or the Lessor's Estate except in accordance with the provisions of Article 5 of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant agrees that it will not take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.04. Representations, Covenants and Warranties of SSB and the Owner Trustee. (a) In addition to and without limiting its other representations and warranties provided for in this Article 7, SSB represents and warrants, in its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v), (vi) and (vii) below, and as the Owner Trustee with respect to items (iii)(B) and (iv) on the date hereof and as of the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America with its principal place of business and chief executive office (as such terms are used in Article 9 of the UCC) at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration and has full corporate power and authority, in its individual capacity or (assuming the Trust Agreement has been duly authorized, executed and delivered by the Initial Owner Participant) as the Owner Trustee, as the case may be, to carry on its business as now conducted, and to execute, deliver and perform this Agreement and the Operative Agreements to which it is or is to be a party; (ii) the execution, delivery and performance by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, of this Agreement and the Operative Agreements to which it is or is to be party have been duly authorized by all necessary corporate action on its part, and do not contravene its articles of association or by-laws; each of this Agreement and the other Operative Agreements to which it is or is to be a party has been duly authorized, and has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be duly executed and delivered by SSB, either in its individual capacity or as the Owner Trustee, as the case may be, and neither the execution and delivery thereof nor SSB's performance of or compliance with any of the terms and provisions thereof will violate any Federal or Connecticut law or regulation governing SSB's banking or trust powers; (iii) (A) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by SSB in its individual capacity, constitute the legal, valid and binding obligation of SSB in its individual capacity enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by SSB in its individual capacity of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on SSB in its individual capacity; (B) assuming due authorization, execution and delivery by each other party thereto, each of the Operative Agreements to which it is or is to be party when duly executed and delivered will, to the extent each such document is entered into by the Owner Trustee in its trust capacity, constitute the legal, valid and binding obligation of the Owner Trustee enforceable against it in such capacity in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law), and the performance by the Owner Trustee of any of its obligations thereunder does not contravene any lease, regulation or contractual restriction binding on the Owner Trustee; (iv) there are no pending or, to its knowledge, threatened actions or proceedings against SSB before any court or administrative agency which would materially and adversely affect the ability of SSB, either in its individual capacity or as the Owner Trustee, as the case may be, to perform its obligations under the Operative Agreements to which it is or is to be party; (v) it shall give the Lessee, the Indenture Trustee and the Owner Participant at least thirty (30) days' prior written notice in the event of any change in its chief executive office or name; (vi) neither the execution and delivery by it, either in its individual capacity or as the Owner Trustee, as the case may be, of any of the Operative Agreements to which it is or is to be a party, requires on the part of SSB in its individual capacity or any of its Affiliates the consent or approval of or the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or Connecticut governmental authority or agency governing its banking or trust powers; and (vii) on the Certificate Closing Date, the proceeds arising from the issuance and sale of the Certificates shall be free of Lessor's Liens attributable to SSB in its individual capacity and on the Delivery Date the Owner Trustee shall be holding whatever title to the Aircraft as was conveyed to it by AVSA, the Aircraft shall be free of Lessor's Liens attributable to SSB in its individual capacity and SSB in its individual capacity is a Citizen of the United States. (b) Lessor's Liens. SSB, in its individual capacity, further represents, warrants and covenants that there are no Lessor's Liens attributable to it in its individual capacity and that there will not be any such Lessor's Liens on the Certificate Closing Date or the Delivery Date. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will in its trust capacity promptly, and in any event within 30 days after the same shall first become known to it, take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. SSB, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days after the same shall first become known to it, any Lessor's Liens attributable to it in its individual capacity which may arise at any time after the date of this Agreement. (c) Indemnity for Lessor's Liens. SSB, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Owner Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee as a result of the failure of SSB to discharge and satisfy any Lessor's Liens attributable to it in its individual capacity, as described in Section 7.04(b) hereof. (d) Securities Act. None of SSB, the Owner Trustee or any Person authorized by either of them to act on its behalf has directly or indirectly offered or sold or will directly or indirectly offer or sell any interest in the Lessor's Estate, or in any similar security relating to the Lessor's Estate, or in any security the offering of which for purposes of the Securities Act of 1933, as amended, would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person. (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB, in its individual capacity, nor the Owner Trustee will take any action to subject the Lessor's Estate or the trust established by the Trust Agreement, as debtor, to the reorganization or liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statute. Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture Trustee in its individual capacity (other than as the Pass Through Trustee) represents on the date hereof and as of the Certificate Closing Date and the Delivery Date 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 and has the power and authority to enter into and perform its obligations under the Indenture, this Agreement and the other Operative Agreements to which it is a party and to authenticate the Certificates to be delivered on the Certificate Closing Date; (ii) the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, and the authentication of the Certificates to be delivered on the Certificate Closing Date, have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under, its articles of association or by-laws; (iii) each of the Indenture and this Agreement, and the other Operative Agreements to which it is or is to be a party, has been duly executed and delivered or, in the case of the Operative Agreements identified in Section 4.02(c) hereof, will on the Delivery Date be executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is (or will be, as the case may be), the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights (regardless of whether enforceability is considered in a proceeding in equity or at law); (iv) neither the execution and delivery by it of the Indenture and this Agreement and the other Operative Agreements to which it is or is to be a party, nor the performance by it of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Federal or state governmental authority or agency governing its banking and trust powers; and (v) on the Certificate Closing Date, the Indenture Trustee holds the Liquid Collateral on behalf of the Owner Trustee and on the Delivery Date, the Indenture Trustee will hold the original counterparts of the Lease, the Lease Supplement and the Ancillary Agreement I. (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, further represents, warrants and covenants that there are no Indenture Trustee's Liens attributable to it in its individual capacity and that there will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its individual capacity, covenants and agrees that it will at its own expense take such action as may be necessary to duly discharge and satisfy in full, promptly, and in any event within 30 days, after the same shall first become known to it, any Indenture Trustee's Liens. (c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity, agrees to indemnify and hold harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass Through Trustee from and against any loss, cost, expense or damage which may be suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Owner Trustee or the Pass Through Trustee as a result of the failure of the Indenture Trustee to discharge and satisfy any Indenture Trustee's Liens attributable to it in its individual capacity, as described in Section 7.05(b) hereof. Section 7.06. Indenture Trustee's Notice of Default. The Indenture Trustee agrees to give the Owner Participant notice of any Default promptly upon a Responsible Officer of the Indenture Trustee having actual knowledge thereof. Section 7.07. Releases from Indenture. The Indenture Trustee covenants and agrees, for the benefit of the Lessee and the Owner Participant, to execute and deliver the instruments of release from the Lien of the Indenture which it is required to execute and deliver in accordance with the provisions of Article XIV of the Indenture, and the Owner Participant agrees, for the benefit of the Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute and deliver such instruments of release. Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee covenants and agrees as to itself only that, so long as no Event of Default under the Lease has occurred and is continuing, neither the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) nor any Person lawfully claiming through the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case may be) shall interfere with the Lessee's right quietly to enjoy the Aircraft during the Term without hindrance or disturbance by the Owner Participant (or the Owner Trustee, the Indenture Trustee or the Pass Through Trustee as the case may be), provided, however, that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee. Section 7.09. Pass Through Trustee's Representations and Warranties. The Pass Through Trustee, in its individual capacity (except with respect to clause (iii) below), represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and the Series Supplements and the performance of its obligations hereunder and thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been fully authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; and (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date the Series Supplements will be, duly executed and delivered by it (in its individual and trust capacities) and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee (in its individual and trust capacities), enforceable in accordance with its respective terms except as 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). Section 7.10. Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of the Owner Participant, the Owner Trustee (in its individual or trust capacity), the Pass Through Trustee (in its individual or trust capacity), the Subordination Agent (in its individual capacity or trust capacity) and the Indenture Trustee (in its individual or trust capacity) provided for in this Article 7, and their respective obligations under any and all of them, shall survive the Closings, the delivery of the Aircraft and the expiration or other termination of this Agreement, and the other Operative Agreements. Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to compliance by the Lessee with all of its obligations under the Operative Agreements, each of the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if the Lessee elects to terminate the Lease and to purchase the Aircraft pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease, and so long as no Event of Default shall have occurred and be continuing then, upon compliance with the applicable provisions of said Section 4.02(a) of the Lease, the Owner Trustee will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens) but subject to the Lien of the Indenture, all of the Owner Trustee's right, title and interest in and to the Aircraft, and if the Lessee, in connection with such purchase, elects pursuant to Section 4.02(a)(A), (D), (E) or (F) of the Lease to assume the obligations of the Owner Trustee to the Indenture Trustee and the Holders under the Indenture, the Certificates and hereunder, each of the parties shall execute and deliver appropriate documentation permitting the Lessee to assume such obligations on the basis of full recourse to the Lessee, maintaining for the benefit of the Holders the security interest in the Aircraft created by the Indenture, and upon compliance with the provisions of this Section 7.11 releasing the Owner Participant and the Owner Trustee from all obligations in respect of the Certificates, the Indenture and all other Operative Agreements except any obligations which shall have arisen (or with respect to events which shall have occurred) prior to such assumption and take all such other actions as are reasonably necessary to permit such assumption by the Lessee. (b) In connection with such assumption: (i) the Lessee shall execute and deliver an instrument satisfactory in form and substance to the Indenture Trustee (A) pursuant to which the Lessee irrevocably and unconditionally assumes and undertakes, with full recourse to the Lessee, to pay, satisfy and discharge when and as due (at the stated maturity thereof, by acceleration or otherwise) the principal of, Make-Whole Premium, if any, interest and all other sums owing on all Outstanding Certificates (or on the Lessee's substituted obligations) in accordance with their terms and to punctually perform and observe all of the covenants and obligations hereunder and under the Indenture and the Certificates (as the same may be amended in connection with such assumption) to be performed or observed by the Owner Trustee and (B) which contains amendments to the Indenture, in form and substance satisfactory to the Indenture Trustee and the Holders, that incorporate therein such provisions from the Lease and this Agreement as may be appropriate, including, without limitation, events of default substantially identical in scope and effect to those set forth in the Lease and covenants substantially identical to the covenants of the Lessee hereunder and under the Lease; (ii) the instrument referred to in paragraph (i) of this Section 7.11(b), any UCC financing statements relating thereto, and any other documents which shall be necessary (or reasonably requested by the Indenture Trustee) to establish the Lessee's title to and interest in the Aircraft or to reflect the substitution of the Lessee for the Owner Trustee under the Operative Agreements or to continue the perfection of the security interests in the Aircraft and the other rights, Property and interests included in the Trust Indenture Estate for the benefit of the Holders (or the Lessee's substituted obligations) shall be filed in such form, manner and places as are necessary or, in the reasonable opinion of the Indenture Trustee, advisable for such purpose; (iii) the Indenture Trustee shall have received an insurance report dated the effective date of such assumption of an independent insurance broker and certificates of insurance, each in form and substance satisfactory to the Indenture Trustee, as to the due compliance as of the effective date of such assumption with the terms of Article 13 of the Lease (as it relates to the Indenture Trustee) relating to the insurance with respect to the Aircraft; (iv) the Indenture Trustee shall have received evidence that as of the effectiveness of the assignment on the date of such assumption the Aircraft is free and clear of all Liens other than the Lien of the Indenture and other Permitted Liens; (v) the Indenture Trustee shall have received a certificate from the Lessee that no Event of Default shall have occurred and be continuing as of the effective date of such assumption; and (vi) the Indenture Trustee shall have received (A) from counsel for the Lessee (who may be the Lessee's General Counsel) a legal opinion, in form and substance satisfactory to the Indenture Trustee (w) with respect to the compliance of the assumption contemplated hereby with the terms, provisions and conditions hereof, (x) with respect to the due authorization, execution, delivery, validity and enforceability of the instrument referred to in paragraph (i) of this Section 7.11(b), (y) with respect to the continued perfection of the first and prior Lien and security interest in the Aircraft for the benefit of the Holders of the Certificates (or the Lessee's substituted obligations) referred to in paragraph (ii) of this Section 7.11(b) and (z) with respect to the continued availability of the benefits of Section 1110 of the Bankruptcy Code to the Indenture Trustee for the benefit of the Holders with respect to the Aircraft after giving effect to such assumption, (B) from counsel to the Indenture Trustee and Special Aviation Counsel, a legal opinion comparable to the respective opinions delivered on the Certificate Closing Date or the Delivery Date, as the case may be, with such changes therein as may be appropriate in light of such assumption, and (C) in the case of each opinion described in clause (A) or (B) above, covering such additional matters as the Indenture Trustee shall reasonably request. (c) The Lessee shall pay all reasonable expenses (including reasonable fees and expenses of counsel) of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection with such assumption. Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture is in effect, the Owner Trustee, not in its individual capacity, but solely as trustee under the Trust Agreement, shall not incur any indebtedness for borrowed money except as expressly contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any business or other activity other than the transactions contemplated herein or in any other Operative Agreement (excluding the Tax Indemnity Agreement) and all necessary or appropriate activity related thereto. Section 7.13. Compliance with Trust Agreement, Etc. Each of the Owner Participant, SSB and the Owner Trustee agrees with the Lessee, the Indenture Trustee and the Pass Through Trustee that so long as the Lien of the Indenture shall be in effect it will (i) comply with all of the terms of the Trust Agreement applicable to it in its respective capacity, the noncompliance with which would materially adversely affect any such party and (ii) not take any action, or cause any action to be taken, to amend, modify or supplement any provision of the Trust Agreement in a manner that would adversely affect any such party without the prior written consent of such party. The Owner Trustee confirms for the benefit of the Lessee, the Indenture Trustee and the Pass Through Trustee that it will comply with the provisions of Article 2 of the Trust Agreement. Notwithstanding anything else to the contrary in the Trust Agreement, so long as the Lease remains in effect, the Owner Participant agrees not to terminate or revoke the trust created by the Trust Agreement without the consent of the Lessee and (so long as the Indenture shall not have been discharged) the Indenture Trustee. Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date, the Certificate Closing Date and the Delivery Date that: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the corporate power and authority to enter into and perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (ii) the execution, delivery and performance of this Agreement, each of the Liquidity Facilities and the Intercreditor Agreement and the performance of its obligations hereunder and thereunder have been fully authorized by all necessary corporate action on its part, and, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or Utah law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its articles of association, or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected; (iii) each of this Agreement, the Liquidity Facilities and the Intercreditor Agreement has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Subordination Agent, enforceable in accordance with its respective terms except as 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) there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Utah or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Certificates 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); (v) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (vi) the Subordination Agent has not directly or indirectly offered any Certificate for sale to any Person or solicited any offer to acquire any Certificates from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Certificate for sale to any Person, or to solicit any offer to acquire any Certificate from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (vii) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, any Underwriter or the Lessee. (b) Covenants. (i) The Subordination Agent agrees not to amend any Liquidity Facility without the consent of the Lessee (so long as no Event of Default shall have occurred and be continuing) and of the Owner Participant (such consents not to be unreasonably withheld). (ii) In connection with the deposit in the applicable Cash Account of amounts drawn pursuant to any Downgrade Drawing under a Liquidity Facility, the Subordination Agent agrees, so long as no Event of Default shall have occurred and be continuing, to pay to the Lessee promptly following each Regular Distribution Date any Investment Earnings on the amount so deposited which remain after application of such Investment Earnings pursuant to Section 2.06 of such Liquidity Facility to the interest payable on such Downgrade Drawing under Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section shall have the meanings specified in the Intercreditor Agreement. ARTICLE 8 TAXES Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The Lessee agrees promptly to pay when due, and to indemnify and hold each Indemnitee harmless from all license, recording, documentary, registration and other fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), fees, levies, imposts, recording duties, charges, assessments or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively called "Taxes"), however imposed (whether imposed upon any Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any Engine or any Part, the Lessor's Estate, the Trust Indenture Estate, Rent or otherwise), by any Federal, state or local government or taxing authority in the United States, or by any government or taxing authority of a foreign country or of any political subdivision or taxing authority thereof or by a territory or possession of the United States or an international taxing authority, upon or with respect to, based upon or measured by: (i) the Aircraft, the Airframe, any Engine or any Part; (ii) the location, replacement, conditioning, refinancing, control, purchase, registration, reregistration, repossession, improvement, maintenance, redelivery, manufacture, acquisition, purchase, financing, mortgaging, ownership, acceptance, rejection, delivery, non-delivery, leasing, subleasing, transport, insuring, inspection, registration, assembly, abandonment, preparation, installment, possession, use, operation, return, presence, storage, repair, transfer of title, modification, rebuilding, import, export, alteration, addition, replacement, assignment, overhaul, transfer of registration or registration, imposition of any lien, sale or other disposition of the Aircraft, Airframe, any Engine or any Part thereof or interest therein; (iii) the rentals (including Basic Rent and Supplemental Rent), receipts or earnings arising from the Operative Agreements or from the purchase, financing, ownership, delivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe or any part thereof or interest therein; (iv) any or all of the Operative Agreements; (v) the Property, or the income or other proceeds received with respect to the Property, held by the Owner Trustee under the Trust Agreement or after an Event of Default under the Lease, or by the Indenture Trustee under the Indenture; (vi) otherwise with respect to or by reason of the transactions described in or contemplated by the Operative Agreements; (vii) the payment of the principal or interest or other amounts payable with respect to the Certificates; (viii) the Certificates or the Pass Through Certificates or the issuance, acquisition, or refinancing thereof or the beneficial interests in the Lessor's Estate or the creation thereof under the Trust Agreement; or (ix) any assumption by the Lessee pursuant to Section 7.11 of this Agreement and Section 2.12 of the Indenture. (b) Exceptions. The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) With respect to an Indemnitee, Taxes based upon, measured by or with respect to the net or gross income, items of tax preference or minimum tax or excess profits, receipts, value added (but only to the extent such value added tax is in the nature of an income tax), capital, franchise, net worth or conduct of business or other similarly-based Taxes of such Indemnitee (other than any Taxes in the nature of sales, use, transfer, excise, rental, license, ad valorem, property or other similarly based Taxes) (the "Income Taxes"); provided, however that the provisions of this paragraph (b)(i) shall not exclude from the indemnity described in Section 8.01(a) hereof, any Income Taxes to the extent such Income Taxes are imposed by any jurisdiction in which the Indemnitee would not be subject to such Income Taxes but for, or would be subject to such Income Taxes solely as a result of, (x) the operation, registration, location, presence, or use of the Aircraft, Airframe, any Engine or any Part thereof, in such jurisdiction or (y) the place of incorporation or principal office or the activities of the Lessee or any sublessee in such jurisdiction (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by the Indemnitee from such Income Taxes, taking into account any incremental current Tax benefit in another tax jurisdiction resulting from payment of such Income Taxes); provided, further, that the provisions of this paragraph (b)(i) relating to Income Taxes shall not exclude from the indemnity described in Section 8.01(a) hereof any Income Taxes for which the Lessee would be required to indemnify an Indemnitee (x) so that any payment under the Operative Agreements, otherwise required to be made on an After-Tax Basis, is made on an After-Tax Basis or (y) pursuant to the last sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement; (ii) [Reserved]; (iii) Taxes arising out of or measured by acts, omissions, events or periods of time (or any combination of the foregoing) which occur after (and are not attributable to acts, omissions or events occurring contemporaneously with or prior to) (A) the payment in full of all amounts payable by the Lessee pursuant to and in accordance with the Operative Agreements, or the earlier discharge in full of the Lessee's payment obligations under and in accordance with the Lease and the Operative Agreements (and the Certificates in the case of the Indenture Trustee or the Trust Indenture Estate if the Lessee shall have assumed the Certificates pursuant to Section 7.11 of this Agreement), and (B) the earliest of (x) the expiration of the Term of the Lease and return of the Aircraft in accordance with Article 12 of the Lease, (y) the termination of the Lease in accordance with the applicable provisions of the Lease and return of the Aircraft in accordance with the Lease, or (z) the termination of the Lease in accordance with the applicable provisions of the Lease and the transfer of all right, title and interest in the Aircraft to the Lessee pursuant to its exercise of any of its purchase options set forth in Section 4.02(a) of the Lease, except that, notwithstanding anything in this Section 8.01(b) to the contrary, Taxes incurred in connection with the exercise of any remedies pursuant to Article 17 of the Lease following the occurrence of an Event of Default shall not be excluded from the indemnity described in Section 8.01(a) hereof; (iv) As to the Owner Trustee, Taxes imposed against the Owner Trustee upon or with respect to any fees for services rendered in its capacity as Owner Trustee under the Trust Agreement or, as to the Indenture Trustee, Taxes imposed against the Indenture Trustee upon or with respect to any fees received by it for services rendered in its capacity as Indenture Trustee under the Indenture; (v) Taxes imposed on an Indemnitee that would not have been imposed but for the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct not actually committed by but instead imputed to such Indemnitee by reason of such Indemnitee's participation in the transactions contemplated by the Operative Agreements) or the breach by such Indemnitee of any representation, warranty or covenant contained in the Operative Agreements or any document delivered in connection therewith (unless attributable to a breach of representation, warranty or covenant of the Lessee); (vi) Taxes imposed on the Owner Trustee or the Owner Participant or any successor, assign or Affiliate thereof which became payable by reason of any voluntary or involuntary transfer or disposition by such Indemnitee subsequent to the Delivery Date, including revocation of the Trust, of any interest in some or all of the Aircraft, Airframe, Engines or Parts thereof or its interest in the Lessor's Estate, other than (A) Taxes that result from transfers or dispositions which occur while an Event of Default under the Lease has occurred and is continuing at the time of such transfer or disposition or (B) Taxes that result from any transfer or disposition pursuant to the terms of the Lease; (vii) Taxes imposed on the Owner Participant for which the Lessee is obligated to indemnify the Owner Participant pursuant to the Tax Indemnity Agreement; (viii) Notwithstanding anything herein to the contrary, Taxes imposed on a successor, assign or other transferee (including, without limitation, a transferee which is a new lending office of an original Indemnitee) of any entity or Person which on the Certificate Closing Date is an Indemnitee (for purposes of this clause (vii), an "original Indemnitee") or such original Indemnitee to the extent that such Taxes exceed the amount of Taxes that would have been imposed and would have been indemnifiable pursuant to Section 8.01(a) hereof had there not been a succession, assignment or other transfer by such original Indemnitee of any such interest of such Indemnitee in the Aircraft or any Part thereof, any interest in or under any Operative Agreement, or any proceeds thereunder (it being understood that for purposes of determining the amount of indemnification that would have been due to such original Indemnitee with respect to a net income Tax, it shall be assumed that such original Indemnitee would be subject to taxation on its income at the highest marginal statutory rate applicable to it); provided, however, that the exclusion provided by this clause (vii) shall not apply in the case of a succession, assignment or other transfer (1) while an Event of Default under the Lease or the Indenture has occurred and is continuing; (2) required by any provision of the Operative Agreements (other than pursuant to Section 7.02 hereof) or (3) in the case of the Owner Participant, to any Tax other than an Income Tax; (ix) [Reserved]; (x) any Taxes which have been included in the Purchase Price; (xi) any Taxes which would not have been imposed but for a Lessor's Lien with respect to the Owner Participant or an Indenture Trustee's Lien with respect to the Indenture Trustee; (xii) any Taxes imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (or any funded participation therein) (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding; and (xiii) Taxes imposed by any jurisdiction to the extent they would have been imposed on the Lessor or the Owner Participant for activities in such jurisdiction unrelated to the transactions contemplated by the Operative Agreements. (c) Withholding. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is a Non-U.S. Person except to the extent that such a holder of a Pass Through Certificate has furnished evidence to the Pass Through Trustee sufficient under applicable law to entitle such holder of a Pass Through Certificate to any exemption from or reduction in the rate of withholding on interest claimed by such holder of a Pass Through Certificate. The Indenture Trustee shall withhold any Taxes required to be withheld on any payment to a Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or the Pass Through Trustee fails to withhold a Tax required to be withheld with respect to any Holder of a Certificate or any holder of a Pass Through Certificate or any claim is otherwise asserted by a taxing authority against the Owner Trustee or the Owner Participant for any withholding tax, the Lessee will indemnify the Owner Trustee and the Owner Participant (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against any such Taxes required to be withheld and any interest and penalties with respect thereto, along with any other costs (including reasonable attorney's fees) incurred in connection with any such claim. The Indenture Trustee or the Pass Through Trustee, as the case may be, in its individual capacity (and without recourse to the Trust Indenture Estate), shall indemnify the Lessee (without regard to the exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made pursuant to the preceding sentence. Section 8.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Tax indemnified against under Section 8.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a permanent tax benefit by reason of the payment of any Tax paid or indemnified against by the Lessee, such Indemnitee shall promptly pay to the Lessee to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Lessee shall have made all payments then due to such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such permanent tax benefit plus any other permanent tax benefit actually realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Lessee, and (y) the amount of the payment made under this Section 8.02 and Section 8.01 hereof by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore required to be made under this Section 8.02 and Section 8.01 hereof (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to Section 8.01 hereof); provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence as long as an Event of Default shall have occurred and be continuing under the Lease. The Lessee shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence (or a tax benefit otherwise taken into account in calculating the Lessee's indemnity obligation hereunder) to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). Section 8.03. Time of Payment. Any amount payable to an Indemnitee pursuant to this Article 8 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable, provided that in the case of amounts which are being contested by the Lessee in good faith or by the Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be payable 30 days after the time such contest is finally resolved. Section 8.04. Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Lessee is liable for a payment or indemnity hereunder, such Indemnitee shall promptly give the Lessee notice in writing of such claim and shall furnish the Lessee with copies of any requests for information from any taxing authority relating to such Taxes with respect to which the Lessee may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Article 8, except to the extent that the Lessee's contest rights have been materially and adversely impaired by the failure to provide such notice. The Indemnitee shall in good faith, with due diligence and at the Lessee's expense, if timely requested in writing by the Lessee, contest (or, at the Indemnitee's option, require the Lessee to contest in the name of the Lessee, if permitted by law) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as non-payment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lessor's Lien on the Aircraft, Airframe or any Engine or any risk of criminal liability; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee, after reasonable discussion with the Lessee and consideration in good faith of any suggestion made by the Lessee as to the method of pursuing such contest, elects to conduct the contest, such Indemnitee shall determine the manner in which to contest such Taxes, and shall periodically or upon the Lessee's request advise the Lessee of the progress of such contest; provided, however, that if the Indemnitee determines in its sole discretion that such participation will not adversely affect such Indemnitee's contest of any Taxes not indemnified hereunder, the Lessee shall have the right to participate in such contest, including, among other rights, the right to attend governmental or judicial conferences (to the extent unrelated issues are not discussed) concerning such claim and the right to review and approve all submissions to any governmental or other authority insofar as they relate to the Tax for which indemnification is sought. Notwithstanding the preceding sentences of this Section 8.04, such Indemnitee shall not be required to take or continue any action unless the Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on demand and on an After-Tax Basis for any liability or reasonable expense which such Indemnitee may incur as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes, (ii) delivered to the Indemnitee a written acknowledgment of the Lessee's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful and of the inapplicability of any exclusion or defenses thereto, provided, however, that such acknowledgement shall not preclude the Lessee from raising defenses to liability under this Agreement if a decision in such contest is rendered which clearly articulates the cause of such Tax and the cause, as so articulated, is not one for which the Lessee is responsible to pay an indemnity hereunder, (iii) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under the Operative Agreements. In no event shall such Indemnitee be required or the Lessee permitted to contest pursuant to this Section 8.04 the imposition of any Tax for which the Lessee is obligated to indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have received an opinion of independent tax counsel, at the Lessee's expense, selected by such Indemnitee and reasonably satisfactory to the Lessee ("Tax Counsel") to the effect that a reasonable basis exists for contesting such claim, (ii) such Indemnitee shall have determined that such contest will not result in any material risk of loss, sale or forfeiture of, or the creation of a Lien (other than Lessor's Liens) on, the Aircraft or any part thereof or interest thereon or in a risk of criminal liability, or adversely affect the Trust Indenture Estate, (iii) if an Event of Default shall have occurred and be continuing, the Lessee shall have provided security for its obligations hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall be conducted in a manner requiring payment of the claim in advance, the Lessee shall have advanced sufficient funds, on an interest free basis, to make the payment required, and agreed to indemnify the Indemnitee against any additional net adverse tax consequences on an After-Tax Basis to such Indemnitee of such advance and (v) the issue shall not be the same as an issue previously contested hereunder and decided adversely, unless the Indemnitee shall have received, at the Lessee's sole expense, a written opinion, in form and substance reasonably satisfactory to such Indemnitee, of Tax Counsel, to the effect that the applicable circumstances or law has changed and, in light thereof, there is substantial authority within the meaning of Section 6662(d) of the Code, as interpreted by the Treasury regulations thereunder, or under similar principles of state or foreign law (as the case may be) for contesting such claim and (vi) the amount of the indemnity payments the Lessee would be required to make with respect to such adjustment, when aggregated with similar adjustments that could be raised in other taxable years of such Indemnitee is at least $50,000. The Indemnitee shall not appeal any judicial decision unless it receives an opinion of independent tax counsel, at the Lessee's sole expense, selected by such Indemnitee and reasonably satisfactory to the Lessee to the effect that a reasonable basis continues to exist for the Indemnitee's position. Nothing contained in this Section 8.04 shall require any Indemnitee to contest or continue to contest, or permit Lessee to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.04, if such Indemnitee shall waive payment by Lessee of any amount that might otherwise be payable by Lessee under this Article 8 in connection with such claim. Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Lessee shall have paid for such Indemnitee or for which the Lessee shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Event of Default by the Lessee hereunder or under the Lease (in which case payment shall not be made to the Lessee until such Event of Default shall have been cured), such Indemnitee shall pay to the Lessee an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Article 8 and (z) Taxes imposed with respect to the accrual or receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 8 and (b) to the extent that the amount of such payment would exceed (i) the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 8 less (ii) the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 8. Any subsequent loss of such refund or tax benefit shall be treated as a Tax subject to indemnification under the provisions of this Article 8 (in the case of any such tax benefit, without regard to Section 8.01(b) hereof). Section 8.06. Lessee's Reports. In case any report or return is required to be made with respect to any obligation of the Lessee under this Article 8, the Lessee shall make such report or return, except for any such report or return that the Indemnitee has notified the Lessee that it intends to file, in such manner as will show the ownership of the Aircraft in the Owner Trustee and shall send a copy of the applicable portions of such report or return to the Indemnitee and the Owner Trustee or will notify the Indemnitee of such requirement and make such report or return in such manner as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee will provide such information reasonably available to the Lessee as the Indemnitee may reasonably require from the Lessee to enable the Indemnitee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements (without duplication of the requirements of Section 3 of the Tax Indemnity Agreement) and any audit information request arising from any such filing. The Indemnitee will provide such information reasonably available to it as the Lessee may reasonably require from such Indemnitee to enable the Lessee to fulfill its tax filing requirements with respect to the transactions contemplated by the Operative Agreements and any audit information request arising from such filing; provided that in no event shall any Indemnitee be required to provide copies of any of its tax returns. The Lessee shall hold the Indemnitee harmless from and against any liabilities, including penalties, additions to tax, fines and interest, imposed upon or incurred by such Indemnitee to the extent directly attributable to any insufficiency or inaccuracy in any return, statement, or report prepared by the Lessee or information supplied by the Lessee, or directly attributable to the Lessee's failure to supply reasonably available information to such Indemnitee as required by this Section 8.06. Section 8.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 8 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of the Operative Agreements. Section 8.08. Payment of Taxes. With respect to any Tax otherwise indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe, any Engine or Parts, to the extent permitted by the applicable federal, state, local or foreign law, the Lessee shall pay such tax directly to the relevant Taxing authority and file any returns or reports required with respect thereto; provided, however, that the Lessee shall not make any statements or take any action which would indicate that the Lessee or any Person other than the Owner Trustee or the Owner Participant are the owner of the Aircraft, the Airframe, any Engine or any Part or which would otherwise be inconsistent with the terms of the Lease and the position thereunder of the Owner Trustee and the Owner Participant. Copies of such returns or reports, together with evidence of payment of any tax due, shall be sent by the Lessee to the Owner Participant within thirty (30) days after the date of each payment by the Lessee of any Tax. Section 8.09. Reimbursements by Indemnitees Generally. If, for any reason, Lessee is required to make any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Operative Agreements or on the Aircraft, the Airframe, the Engines, the Parts of any part thereof, which Taxes are not the responsibility of the Lessee with respect to such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of the Lessee's demand therefor an amount which equals the amount actually paid by the Lessee with respect to such Taxes. ARTICLE 9 GENERAL INDEMNITY Section 9.01. Generally. (a) The Lessee agrees to indemnify each Indemnitee against and agrees to protect, defend, save and keep harmless each Indemnitee from any and all liabilities, obligations, losses, damages (including if, as a result of an Indenture Event of Default described in Section 7.01(a)(i) of the Indenture, the Indenture Trustee shall have sold all or any portion of the Indenture Estate and the proceeds thereof were less than an amount equal to accrued and unpaid Basic Rent on the date of sale plus the Stipulated Loss Value as of such date, damages equal to such shortfall together with interest thereon to the extent permitted by law at the Debt Rate until such shortfall is paid in full), penalties, claims, actions, suits, costs, disbursements and expenses (including reasonable legal fees and expenses and all costs and expenses relating to amendments, supplements, adjustments, consents, refinancings and waivers under the Operative Agreements except as otherwise provided in Section 10.01(c)(i) or Article 15 hereof) of every kind and nature (whether or not any of the transactions contemplated by this Agreement are consummated) (individually, an "Expense," collectively, "Expenses"), which may be imposed on, incurred or suffered by or asserted against any Indemnitee, in any way relating to, based on or arising out of: (i) this Agreement, the Lease, the Indenture, the Pass Through Agreement, the Trust Agreement, the Intercreditor Agreement, the Liquidity Facilities, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale or any other Operative Agreement or any other document entered into in connection herewith or any sublease or transfer or any transactions contemplated hereby or thereby; (ii) the operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing of the Aircraft, Airframe, or any Engine or any engine used in connection with the Airframe, or any part thereof by the Lessee, any sublessee or any other Person whatsoever, whether or not such operation, possession, use, non-use, maintenance, storage, overhaul, delivery, non-delivery, control, repair or testing is in compliance with the terms of the Lease, including without limitation, claims for death, personal injury or property damage or other loss or harm to any Person whatsoever, including, without limitation, any passengers, shippers or other Persons wherever located, and claims relating to any laws, rules or regulations, including, without limitation, environmental control, noise and pollution laws, rules or regulation; (iii) the manufacture, design, sale, return, purchase, acceptance, rejection, delivery, non-delivery, condition, repair, modification, servicing, rebuilding, airworthiness, registration, reregistration, import, export, performance, non-performance, lease, sublease, transfer, merchantability, fitness for use, alteration, substitution or replacement of any Airframe, Engine, or Part under the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the GTA or the Engine Warranty Assignment or other transfer of use or possession, or other disposition of the Aircraft, the Airframe, any Engine or any Part including, without limitation, latent and other defects, whether or not discoverable, strict tort liability, and any claims for patent, trademark or copyright infringement; (iv) any breach of or failure to perform or observe, or any other non-compliance with, any condition, covenant or agreement to be performed, or other obligations of the Lessee under any of the Operative Agreements, or the falsity or inaccuracy of any representation or warranty of the Lessee in any of the Operative Agreements (other than representations and warranties in the Tax Indemnity Agreement); (v) the Collateral Account and the Liquid Collateral; (vi) the enforcement of the terms of the Operative Agreements and the administration of the Trust Indenture Estate; and (vii) the offer, issuance, sale or delivery of any Certificate or any Pass Through Certificate, or any refunding or refinancing thereof, or interest in the Lessor's Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Lessor's Estate, the Indenture or the Trust Indenture Estate (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other federal or state statute, law or regulation, or at common law or otherwise relating to securities), or the action or inaction of the Owner Trustee or Indenture Trustee as trustees, in the manner contemplated by this Agreement, the Indenture, the Indenture and Security Agreement Supplement or the Trust Agreement and in the case of the Owner Participant, its obligations arising under Section 6.01 of the Trust Agreement. The foregoing indemnity by the Lessee is intended to include and cover, but is not limited to, any Expense to which the Indemnitees may be subject as a result of their respective ownership or leasing of any interest in the Aircraft, Airframe, any Engine or Part during the Term, whether or not in the Lessee's possession or control, insofar as such Expense relates to any activity or event whatsoever involving such item while it is under lease to the Lessee (or after termination of the Lease in connection with the exercise of remedies thereunder to the extent that such Expense is attributable to the transactions contemplated hereby and by the other Operative Agreements), and such Expense does not fall within any of the exceptions listed in Section 9.01(b) hereof. (b) Exceptions. The indemnity provided for in Section 9.01(a) shall not extend to any Expense of any Indemnitee to the extent it: (i) would not have occurred but for the willful misconduct or gross negligence of such Indemnitee; (ii) after the Delivery Date, is in respect of the Aircraft, and is attributable to acts or events which occur after the Aircraft is no longer part of the Lessor's Estate or leased under the Lease or, if the Aircraft remains a part of the Lessor's Estate, after the expiration of the Term and any holdover period under Section 12.05 of the Lease (other than pursuant to Article 17 of the Lease, in which case the indemnity provided in Section 9.01(a) hereof shall survive for so long as Lessor or the Indenture Trustee shall be entitled to exercise remedies under such Article 17), or to acts or events which occur after return of possession of the Aircraft by the Lessee in accordance with the provisions of the Lease but in any such case only to the extent not fairly attributable to acts or omissions of the Lessee prior to expiration of the Term and any holdover period under Section 12.05 of the Lease, including without limitation the Lessee's failure to fully discharge all of its obligations under the Lease or the other Operative Agreements; (iii) is a Tax, whether or not the Lessee is required to indemnify therefor pursuant to Article 8 hereof or pursuant to the Tax Indemnity Agreement; (iv) is a cost or expense required to be paid by the Owner Participant or its permitted transferees (and not by the Lessee) pursuant to this Agreement or any other Operative Agreement (other than the Owner Participant's obligations under Section 6.01 of the Trust Agreement) and for which the Lessee is not otherwise obligated to reimburse the Owner Participant, directly or indirectly; (v) would not have been incurred by such Indemnitee if such Indemnitee had not been in breach of its representations or warranties, or had not defaulted in the observance and performance of the terms and provisions required to be observed and performed by it, in this Agreement, the Purchase Agreement Assignment, the Lease, the Indenture, the Trust Agreement or any other Operative Agreement to which it is a party unless such breach or default shall be a result of the breach or default of any of the foregoing by the Lessee or another Indemnitee; (vi) [reserved]; (vii) in the case of the Owner Participant, Lessor's Liens to the extent attributable to the Owner Participant; in the case of the Owner Trustee, Lessor's Liens to the extent attributable to the Owner Trustee; and in the case of the Indenture Trustee, Indenture Trustee's Liens; (viii) is in the case of the Owner Participant or the Owner Trustee, to the extent attributable to the offer or sale by such Indemnitee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (including an offer or sale resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor), unless in each case such offer or sale shall occur (w) in connection with a Refinancing, (x) as a result of exercise of remedies under Article 17 of the Lease, (y) during a period when an Event of Loss has occurred or (z) in connection with the termination of the Lease or action or direction of the Lessee pursuant to the Lease; or (ix) which is incurred by the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the result of any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Pass Through Certificate (i) over which purchase or holding the Owner Participant or any Affiliate thereof has discretion or control (other than in the capacity of a directed trustee or custodian), or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control (other than in the capacity of a directed trustee or custodian), over such purchase or holding. Section 9.02. After-Tax Basis. The amount which the Lessee shall be required to pay with respect to any Expense indemnified against under Section 9.01 hereof shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Expense not been incurred. If any Indemnitee actually realizes a permanent Tax benefit by reason of the payment of such Expense paid or indemnified against by the Lessee which was not considered in the computation thereof, such Indemnitee shall promptly pay to the Lessee, but not before the Lessee shall have made all payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an amount equal to the lesser of (x) the sum of such Tax benefit plus any other permanent Tax benefit actually realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of such payment pursuant to this Section 9.02 by the Lessee to such Indemnitee plus the amount of any other payments by the Lessee to such Indemnitee theretofore made pursuant to this Section 9.02 less the amount of any payments by such Indemnitee to the Lessee theretofore made pursuant to this Section 9.02 (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments pursuant to this Section 9.02), it being intended that no Indemnitee should realize a net Tax benefit pursuant to this Section 9.02 unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 9.02; provided, however, that notwithstanding the foregoing portions of this sentence, such Indemnitee shall not be obligated to make any payment to the Lessee pursuant to this sentence so long as an Event of Default shall have occurred and be continuing. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of such Tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be indemnifiable pursuant to the provisions of Section 8.01 hereof without regard to Section 8.01(b) hereof. Section 9.03. Subrogation. Upon the payment in full of any indemnity pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be subrogated to any right of the Indemnitee, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the Person indemnified may have against any other Indemnitee in respect of the matter against which such indemnity has been made. Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall give prompt written notice one to the other of any liability of which such party has knowledge for which the Lessee is, or may be, liable under this Article 9; provided, however, that failure to give such notice shall not terminate any of the rights of the Indemnitees under this Article 9, except (with respect to such Indemnitee) to the extent that the Lessee has been materially prejudiced by the failure to provide such notice. Unless otherwise provided in the Operative Agreements, any amount payable to an Indemnitee pursuant to this Article 9 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all or any part of any amount which the Lessee shall have paid to such Indemnitee or for which the Lessee shall have reimbursed such Indemnitee under this Article 9, and provided there shall not have occurred a Payment Default or an Event of Default (in which case payment shall not be made to the Lessee until such Payment Default or Event of Default shall have been cured) such Indemnitee shall pay to the Lessee the amount of any such recovery, including interest received with respect to the recovery, net of any Taxes paid or payable as a result of the receipt of the recovery and interest, plus any net additional permanent income tax benefits actually realized by Indemnitee as the result of any payment made pursuant to this sentence less any reasonable costs and expense of any Indemnitee not reimbursed by the Lessee; provided, however, that such amount shall not be payable (a) before such time as the Lessee shall have made all payments or indemnities then due and payable to such Indemnitee under this Article 9 or (b) to the extent that the amount of such payment would exceed the amount of all prior payments by the Lessee to such Indemnitee pursuant to this Article 9, less the amount of all prior payments by such Indemnitee to the Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax benefit shall be subject to indemnification under Article 8 or this Article 9, as the case may be. Section 9.06. Defense of Claims. The Lessee or its insurers shall have the right (in each such case at the Lessee's sole expense) to investigate or, provided that (i) the Lessee or its insurers shall not reserve the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, (ii) in the case of the Lessee, no Event of Default shall have occurred and be continuing and (iii) the Lessee shall have first acknowledged in writing to such Indemnitee the Lessee's obligation to indemnify such Indemnitee hereunder in respect of such claim, defend any claim covered by insurance for which indemnification is sought pursuant to this Article 9 and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto, and provided, further, the Lessee shall not be entitled to assume and control the defense of any such claim if and to the extent such Indemnitee reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Lessee or the insurers under a policy of insurance maintained by the Lessee undertake the defense of an Indemnitee with respect to such a claim, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Lessee or such insurers. Subject to the requirement of any policy of insurance applicable to a claim, an Indemnitee may participate at its own expense at any judicial proceeding controlled by the Lessee or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Lessee or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 9.06. No Indemnitee shall enter into any settlement or other compromise with respect to any claim described in this Section 9.06 without the prior written consent of the Lessee, which consent shall not unreasonably be withheld or delayed, unless such Indemnitee waives its right to be indemnified under this Article 9 with respect to such claim. Section 9.07. Survival of Obligations. The representations, warranties, indemnities and agreements of the Lessee provided for in this Article 9 and the Lessee's obligations under any and all of them shall survive the expiration or other termination of this Agreement, the Tax Indemnity Agreement, the Trust Agreement, the Indenture, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Lease and the other Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, Expenses and disbursements caused by events occurring or existing (or fairly attributable to the Lessee's acts or omissions) prior to or incurred in the process of (i) the return or disposition of the Aircraft under Article 12 or Article 17 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. Section 9.08. Effect of Other Indemnities. The Lessee's obligations under the indemnities provided for in this Agreement shall be those of a primary obligor whether or not the Person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the Person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Section 9.09. Interest. The Lessee will pay to each Indemnitee on demand, to the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Article 9 until the same shall be paid, at the Past Due Rate. ARTICLE 10 TRANSACTION COSTS Section 10.01. Transaction Costs and Other Costs. (a) Transaction Costs. Except as otherwise provided in any amendment to this Agreement, the Lessee (or the Owner Participant following a transfer of the Initial Owner Participant's Beneficial Interest) shall pay all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby on the Certificate Closing Date and the Delivery Date: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of the transaction documentation counsel for the Lessee and counsel for the Owner Trustee, the Indenture Trustee, the Subordination Agent, the Pass Through Trustee, each Liquidity Provider, the LC Bank and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees and expenses of the Pass Through Trustee and each Liquidity Provider and the fees and expenses of the Owner Trustee, the Subordination Agent, the LC Bank and the Indenture Trustee including, without limitation, in connection with the issuance of the Letter of Credit; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees, if any, incurred in printing the Pass Through Certificates; (vii) the fees and expenses incurred in connection with printing the Registration Statement on Form S-3 bearing Registration No. 333-49411 (including any amendment thereto), printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen LLP; (ix) the fees and expenses of Moody's and S&P; (x) the fees and expenses of First Chicago Leasing Corporation; (xi) the reasonable out-of-pocket expenses of the Owner Participant, including, without limitation, any amounts paid in connection with any appraisal report prepared on behalf of the Owner Participant; (xii) reimbursement to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity Provider, the LC Bank and the Pass Through Trustee for any and all fees, expenses and disbursements of the character referred to above or otherwise incurred in connection with the negotiation, preparation, execution and delivery, filing and recording of the Operative Agreements and the documents contemplated thereby, including, without limitation, travel expenses and disbursements which shall have been paid by such party; (xiii) printing and duplicating expenses and all fees, taxes and other charges payable in connection with the recording or filing on or before the Delivery Date of the instruments described in this Agreement; (xiv) initial fees, initial expenses, initial disbursements and the initial costs of distributing the Certificates (but not the continuing fees, expenses, disbursements and costs of distribution) of SSB, as lessor under the Lease and as Owner Trustee under the Trust Agreement and with respect to the administration of the Lease and the Lessor's Estate, of the Indenture Trustee as trustee under the Indenture with respect to the administration of the Trust Indenture Estate and of the Subordination Agent acting under the Intercreditor Agreement; and (xv) any other amounts approved by the Lessee and the Owner Participant. The fees and expenses described in clauses (ii) through (x) of this paragraph shall be allocable to the Owner Participant under this Agreement (1) to the extent incurred specifically with respect to the Owner Participant, and (2) to the extent such fees and expenses are incurred but are not specifically attributable to the Owner Participant, in the proportion that the principal amount of the Certificates bears to the total amount of the Pass Through Certificates. The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value and Termination Value set forth in the Lease have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph is 1.5175000000% of the Purchase Price (the "Estimated Expense Amount"); provided, however, that in no event shall the sum of (i) the Owner Participant's Commitment, (ii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 2.03 hereof, and (iii) the Transaction Costs to be paid by the Owner Participant pursuant to Section 10.01 hereof exceed, in the aggregate, $23,000,000, unless otherwise agreed by the Owner Participant. To the extent that the payment by the Owner Participant of Transaction Costs would cause the sum described in the immediately preceding sentence to exceed $23,000,000, the Lessee shall be obligated to pay the Transaction Costs constituting the First Chicago Leasing Corporation fee and the Davis Polk & Wardwell fee to the extent of such excess and the Owner Participant shall have no obligation to pay such excess. (b) Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees and expenses) of the entity acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under the Trust Agreement with respect to the administration of the Lease and the Lessor's Estate and the continuing fees, expenses and disbursements (including reasonable counsel fees and expenses and initial fees relating to the establishment of any replacement trustee) of the Indenture Trustee, as trustee under the Indenture with respect to the administration of the Trust Indenture Estate, the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement trustee) of the Pass Through Trustee and the Subordination Agent and the continuing fees, expenses and disbursements (including reasonable counsel fees and initial fees relating to the establishment of a replacement liquidity provider) of the Liquidity Providers under each Liquidity Facility shall be paid as Supplemental Rent by the Lessee, including without limitation any amounts payable to the Indenture Trustee or on account of requests by the Indenture Trustee for indemnification under Article XI of the Indenture. (c) Amendments, Supplements and Appraisal. Without limitation of the foregoing, the Lessee agrees: (i) to pay as Supplemental Rent to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Subordination Agent, the Liquidity Providers and the Pass Through Trustee all costs and expenses (including reasonable legal fees and expenses) incurred by any of them in connection with (a) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, or (b) the enforcement of the obligations of the Lessee hereunder or under the other Operative Agreements and the enforcement of this Section 10.01, including, without limitation, the entering into or giving or withholding of any amendments or supplements or waivers or consents, including without limitation, any amendment, supplement, waiver or consent resulting from any work-out, restructuring or similar proceeding relating to the performance or nonperformance by the Lessee of its obligations under the Operative Agreements or (c) any amendment, supplement, waiver or consent (whether or not entered into) under this Agreement, the Lease, the Indenture, the Certificates, the Tax Indemnity Agreement, the Purchase Agreement Assignment or any other Operative Agreement or document or instrument delivered pursuant to any of them, which amendment, supplement, waiver or consent is required by any provision of any Operative Agreement or is requested by the Lessee or necessitated by the action or inaction of the Lessee; provided, however, that the Lessee shall not be responsible for fees and expenses incurred in connection with the offer, sale or other transfer (whether pursuant to Article 5 of the Trust Agreement or otherwise) by the Owner Participant or the Owner Trustee after the Certificate Closing Date of any interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any similar interest (and the Owner Participant shall be responsible for all such fees and expenses), unless such offer, sale or transfer shall occur (A) during a period when an Event of Default has occurred and is continuing under the Lease, (B) during a period following an Event of Loss or (C) in connection with the termination of the Lease or action or direction of the Lessee pursuant to Section 4.02 or Article 10 of the Lease; and (ii) to pay the fees, costs and expenses of all appraisers involved in an independent appraisal of the Aircraft to the extent required under Section 4.03 of the Lease. ARTICLE 11 SUCCESSOR OWNER TRUSTEE Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation and Removal. The Owner Trustee or any successor Owner Trustee may resign or may be removed by the Owner Participant, and a successor Owner Trustee may be appointed and a Person may become Owner Trustee under the Trust Agreement only in accordance with the provisions of Section 3.11 of the Trust Agreement and the provisions of paragraphs (b) and (c) of this Section 11.01. (b) Conditions to Appointment. The appointment in any manner of a successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be subject to the following conditions: (i) Such successor Owner Trustee shall be a Citizen of the United States; (ii) Such successor Owner Trustee shall be a bank or a trust company having combined capital, surplus and undivided profits of at least $100,000,000 or a bank or trust company fully guaranteed by a direct or indirect parent thereof having a combined capital, surplus and undivided profits of at least $100,000,000; (iii) Such appointment shall not violate any provisions of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered or create a relationship which would be in violation of the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (iv) Such successor Owner Trustee shall enter into an agreement or agreements, in form and substance satisfactory to the Lessee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee whereby such successor Owner Trustee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Lease, the Lease Supplement, the Purchase Agreement Assignment, the Engine Warranty Assignment, the Indenture, the Indenture Supplement and any other Operative Agreement to which the Owner Trustee is a party and agrees to be bound by all the terms of such documents applicable to the Owner Trustee and makes the representations and warranties contained in Section 7.04 hereof (except that it may be duly incorporated, validly existing and in good standing under the laws of the United States of America or any State thereof); and (v) All filings of UCC financing and continuation statements, filings in accordance with the Transportation Code and amendments thereto shall be made and all further actions taken in connection with such appointment as may be necessary in connection with maintaining the validity, perfection and priority of the Lien of the Indenture and the valid and continued registration of the Aircraft in accordance with the Transportation Code. (c) Appointment. For so long as the Aircraft remains registered under the Transportation Code, the Owner Participant agrees to appoint promptly a successor Owner Trustee meeting the requirements of Section 11.01(b) hereof in the event the Owner Participant has knowledge that the Owner Trustee at any time shall not be a Citizen of the United States. (d) Revocation. The Owner Participant agrees not to revoke and terminate the Trust Agreement except in accordance with Section 4.01(a) of the Trust Agreement, as in effect on the date hereof or as amended in accordance with the terms of the Operative Agreements. ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS Section 12.01. Liabilities of the Owner Participant. The Owner Participant shall have no obligation or duty to the Lessee or to any Holder with respect to the transactions contemplated by this Agreement, except those obligations or duties expressly set forth in this Agreement, the Trust Agreement, the Tax Indemnity Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Lease or any other Operative Agreement to which the Owner Participant is a party and the Owner Participant shall not be liable for the performance by any party hereto of such other party's obligations or duties hereunder. Under no circumstances shall the Owner Participant as such be liable to the Lessee, nor shall the Owner Participant be liable to any Holder, for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with this Agreement, the Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment, any other Operative Agreement, the ownership of the Aircraft, the administration of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or not such action or inaction is caused by the willful misconduct or gross negligence of the Owner Trustee or the Indenture Trustee. Section 12.02. Interest of Holders of Certificates. A Holder of a Certificate shall have no further interest in, or other right with respect to, the Trust Indenture Estate when and if the principal and interest on all Certificates held by such Holder and all other sums payable to such Holder under this Agreement, under the Indenture and under such Certificates shall have been paid in full. ARTICLE 13 OTHER DOCUMENTS Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby consents in all respects to the execution and delivery of the Trust Agreement, the Indenture, the Intercreditor Agreement and the Liquidity Facilities and to all of the terms of said documents, and the Lessee acknowledges receipt of an executed counterpart of such documents; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of, the terms of the Trust Agreement, the Indenture, the Intercreditor Agreement, the Liquidity Facilities or the Certificates, except that prior to the occurrence and continuance of an Event of Default, no section of the Indenture, the Trust Agreement, the Intercreditor Agreement or the Liquidity Facilities shall be amended or modified in any manner materially adverse to the Lessee without its consent. Section 13.02. Further Assurances. The Lessee hereby confirms to the Owner Participant its covenants set forth in and obligations under the Lease. The Lessee agrees that, except as otherwise provided in the Indenture, the Owner Trustee may not enter into any amendment, modification or supplement of, or give any waiver or consent with respect to, or approve any matter or document as being satisfactory under the Lease without the prior consent of the Indenture Trustee and the Owner Participant and that, except as otherwise provided in the Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee further agrees to deliver to the Indenture Trustee and the Owner Participant a copy of each notice, statement, request, report or other communication given or required to be given to the Owner Trustee under the Lease. Section 13.03. Pass Through Trustee's and Subordination Agent's Acknowledgment. The Pass Through Trustee and the Subordination Agent hereby acknowledge and agree to be bound by all of the terms and conditions of the Indenture, including without limitation, Section 8.02 thereof regarding the rights of the Owner Participant to purchase the Certificates under circumstances specified therein. ARTICLE 14 NOTICES Section 14.01. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at 1980 Nonconnah Boulevard, Memphis, Tennessee 38132, telephone (901) 395-3388, facsimile (901) 395-4758; or to such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or the Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to the Owner Participant; (c) If to the Indenture Trustee, the Subordination Agent or the Pass Through Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5053, facsimile (801) 246-5630; or to such other address as the Indenture Trustee or the Pass Through Trustee, as the case may be, shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (d) If to a Liquidity Provider, to its office at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Germany, Attention: Head of Aircraft Finance Department KIII b 3, telephone 011-49-69-7431-0, facsimile 011-49-69-7431-2944; or to such other address as a Liquidity Provider shall from time to time designate in writing to the Lessor, the Lessee and the Indenture Trustee. ARTICLE 15 REFINANCING Section 15.01. Refinancing. (a) Subject to the terms and conditions of this Section 15.01, the Lessee may request the Owner Participant to participate in up to three refinancings, in whole but not in part, of the Certificates prior to the end of the Basic Term (a "Refinancing"), provided, that, such Refinancing may not occur prior to the fifth anniversary of the Refunding Date. Such Refinancings may be placed in either the private or public markets and shall be denominated in United States dollars (or in any other foreign currency so long as there is no foreign currency risk to the Owner Participant), and shall be on terms that do not materially adversely affect the Owner Participant. The Owner Participant agrees to negotiate promptly in good faith to conclude an agreement with the Lessee as to the terms of any such Refinancing transaction (including the terms of any debt to be issued in connection with such refinancing and the documentation to be executed in connection therewith). Without the consent of the applicable Owner Participant, the prospectus and other offering materials relating to any Refinancing in the form of a public offering shall not identify the Owner Participant and shall not include any financial statements of the Owner Participant or any Affiliate thereof. In connection with any such Refinancing in the form of a public offering, the Lessee shall indemnify the Owner Participant for any liabilities under federal, state or foreign securities laws resulting from such offering. The aggregate principal amount of the new Certificates issued in connection with each Refinancing shall be the same as the aggregate principal amount outstanding on the Certificates being refinanced. (b) Notwithstanding anything herein to the contrary, no Refinancing will be permitted unless the Owner Participant shall have received at least 10 Business Days' prior written notice of the closing date of such Refinancing, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such Refinancing (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not been or will not have been indemnified by the Lessee in a manner reasonably satisfactory to the Owner Participant. Prior to the consummation of any Refinancing pursuant to this Section 15.01, the Owner Participant and the Lessee shall agree upon a schedule setting forth each installment of Basic Rent, Stipulated Loss Values and Termination Values payable pursuant to the Lease as a result of the Refinancing in accordance with Section 3.04 of the Lease, and thereafter the amounts set forth in such schedule shall become the amounts payable under the Lease. Upon the consummation of the Refinancing, the evidence of indebtedness issued pursuant to the Refinancing shall be considered "Certificates" for purposes of this Agreement, the Lease and the Indenture. (c) Notwithstanding the foregoing, the Owner Participant shall have no obligation to proceed with any Refinancing transaction as contemplated by this Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner Participant by agreement in form and substance satisfactory to each of them, for any liability, obligation (other than the obligation to pay principal and interest in respect of the refinanced indebtedness), cost or expense (including, without limitation, reasonable attorneys' fees and Make-Whole Premium and any other premiums or other amounts due under the Indenture), including any adverse tax consequences or impact, related to or arising out of any such Refinancing transaction, except to the extent of amounts included in Transaction Costs and payable by the Owner Participant as provided herein. (d) Each party agrees to take or cause to be taken all requested action, including, without limitation, the execution and delivery of any documents and instruments, including, without limitation, amendments or supplements to the Lease, which may be reasonably necessary or desirable to effect such Refinancing, including, in the case of the Owner Participant, direction to the Owner Trustee by the Owner Participant to prepay the Certificates then outstanding; provided, however, that such Refinancing shall be subject to the satisfaction of each of the following conditions: (i) Payment of principal, accrued interest, Make-Whole Premium and breakage costs, if any, and all other sums due and owing on the Certificates payable under the Indenture; (ii) Payment in full of all other amounts then due and owing by the Lessee under this Agreement, the Indenture, the Lease, the Trust Agreement, and the Certificates then outstanding shall have been made by the Lessee; (iii) Such party shall have received such opinions of counsel (including, without limitation, an opinion received by the Owner Participant from independent tax counsel reasonably satisfactory to the Lessee that such Refinancing shall not result in any adverse tax consequences to the Owner Participant, unless the Lessee shall have agreed to provide an indemnity in respect thereof reasonably satisfactory in form and substance to the Owner Participant), certificates and other documents as it may reasonably request, each in form and substance reasonably satisfactory to such party; (iv) All authorizations, approvals and consents which in the reasonable judgment of the Owner Participant are necessary for such Refinancing shall have been obtained; (v) The Lessee shall have provided or agreed to provide to the Owner Participant, as Supplemental Rent under the Lease, sufficient funds to pay any breakage costs, Make-Whole Premium and any other amounts due under the Indenture; (vi) The satisfaction or waiver by each other party to this Agreement of the conditions set forth in this Section 15.01 to such party's obligations under this Section 15.01; (vii) No Event of Default shall have occurred and be continuing or would occur immediately after giving effect to such Refinancing; and (viii) The documentation relating to such Refinancing shall permit the Lessee to place the Refinancing loan certificates with an ERISA Plan. The Lessee shall not indemnify the Owner Participant, or any of the Owner Participant's Affiliates, assigns, officers, directors, employees, agents and servants, for any Taxes, within the meaning of Article 8 hereof, or Expenses, within the meaning of Article 9 hereof, arising under or in connection with any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, if the sole underwriter or the manager or co-manager of the underwriting syndicate or the selling or placement agent of the Refinancing loan certificates has an exemption from the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Code with respect to pass through certificates, such as Prohibited Transaction Exemption 90-24 or any other comparable exemption, unless such exemption is not available or is not valid with respect to such Refinancing loan certificates. If such exemption is not available or is not valid, then the Lessee shall indemnify the Owner Participant pursuant to, and to the extent provided for, under Articles 8 and 9 hereof for Taxes and Expenses arising under or in connection with any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975 of the Code, resulting from such placement. ARTICLE 16 [RESERVED] ARTICLE 17 MISCELLANEOUS Section 17.01. [Reserved]. Section 17.02. Collateral Account. (a) The Indenture Trustee shall notify the Owner Trustee and the Lessee of any losses incurred on the Specified Investments in the Collateral Account promptly upon the realization thereof, as well as any fees, commissions and other costs, Taxes (other than income taxes) and expenses, if any, incurred by the Indenture Trustee in connection with its administration of the Collateral Account (collectively, "Losses"). Promptly upon receipt of such notification but, in any event, no later than the earlier of the Delivery Date (or, if later, the last day of any investment period referred to in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and the 15th day after the Cut-Off Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, an amount equal to such Losses, provided, however, that on the Delivery Date the Lessee shall pay any such Losses to the Indenture Trustee to the extent that the Debt Portion exceeds the amount in the Collateral Account on such date. In addition to the foregoing, if Series C Certificates are outstanding following the Delivery Date and are required to be prepaid on the Series C Prepayment Date, the Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee, promptly upon receipt of such notification but in any event no later than the Series C Prepayment Date, an amount equal to any additional unreimbursed Losses. (b) The Lessee shall pay to the Subordination Agent, on behalf of the Owner Trustee (A) on each Payment Date prior to the Delivery Date an amount equal to the aggregate amount of interest accrued on the Certificates from (and including) the Certificate Closing Date or previous Payment Date, as the case may be, to, but excluding, such Payment Date, (B) on the first Payment Date subsequent to the Delivery Date, interest accrued on the Certificates from and including the last Payment Date (or, if none, the Certificate Closing Date), to, but excluding, the Delivery Date and (C) on each Payment Date after the Delivery Date but prior to the Series C Prepayment Date, interest accrued on the Series C Certificates, if any, outstanding after the Delivery Date which are required to be prepaid on such Series C Prepayment Date pursuant to Section 2.03(b) hereof, in each case to the extent such interest due is in excess of any earnings on investments in the Collateral Account for the period of accrual of such interest. In addition, the Lessee will pay to the Indenture Trustee on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to clause (b) of the last paragraph of Section 2.04 of the Indenture. (c) If the Aircraft has not been purchased by the Owner Trustee on the Delivery Date, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the 15th day following the Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (d) If any Series C Certificates outstanding after the Delivery Date are subject to prepayment on the Series C Prepayment Date pursuant to Section 6.02(a)(viii) of the Indenture, the Lessee agrees to pay to the Subordination Agent, on behalf of the Owner Trustee, on the Series C Prepayment Date the excess, if any, of the amounts payable under Section 6.02(b)(1) of the Indenture over the amounts released from the Collateral Account under Section 2.16 of the Indenture. (e) All amounts payable by the Lessee pursuant to this Section 17.02 shall be paid to the Indenture Trustee or the Subordination Agent, as the case may be, at its principal office at 79 South Main Street, Salt Lake City, Utah, 84111, Attention: Corporate Trust Department, or as the Indenture Trustee or the Subordination Agent, as the case may be, may otherwise direct within the United States, by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York City time, on the due date of such payment. (f) Prior to the date on which the Lessee shall be obligated to make any payment to the Subordination Agent pursuant to this Section 17.02, the Subordination Agent shall deliver a written notice to the Lessee specifying the amount of such payment with respect to each series of Equipment Trust Certificates. (g) In the event that (i) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment (as defined below) shall be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate becomes liable for such portion or (ii) (x) the Lessee shall be the subject of a voluntary or involuntary proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code on a date less than fifteen days prior to the expiration date of the Letter of Credit (after giving effect to any extensions of such expiration date) and (y) any portion of any payment to the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate which is funded from a Specified Shortfall Payment could be avoided as a preference under Section 547 of the Bankruptcy Code and the Subordination Agent, the Pass Through Trustee or any holder of any Pass Through Certificate could become liable for such portion, the Subordination Agent shall be entitled to draw under the Letter of Credit an amount equal to the aggregate amount of such liability up to the Maximum Stated Amount. The Letter of Credit shall expire no earlier than the date 91 days after the later of the last Specified Shortfall Payment payable under this Section 17.02 and the last "Specified Shortfall Payment" payable under Section 17.02 of any Related Participation Agreement. In the event of any drawing under the Letter of Credit pursuant to clause (ii) of this subsection (g), the proceeds of such drawing shall be applied in accordance with the Intercreditor Agreement. For purposes of this subsection (g), "Specified Shortfall Payment" shall mean any payment by the Lessee pursuant to this Section 17.02 (i) in respect of any Losses which occur as a result of delivery of the Aircraft on a date other than June 1, 1999 or (ii) in respect of interest accrued for any applicable period on any Certificate in excess of any earnings on investments in the Collateral Account for such period. Section 17.03. Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.04. No Oral Modifications. Neither this Agreement nor any of its terms 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. No such written termination, amendment, supplement, waiver or modification shall be effective unless a signed copy shall have been delivered to the Owner Trustee and the Indenture Trustee. A copy of each such termination, amendment, supplement, waiver or modification shall also be delivered to each other party to this Agreement. The consent of each of the Pass Through Trustee and the Subordination Agent, in its capacity as a party to this Agreement and not as a Holder, shall not be required to modify, amend or supplement this Agreement or to give any consent, waiver, authorization or approval with respect to this Agreement under the circumstances in which the consent of the Indenture Trustee would not be required for such modification, amendment, supplement, consent, waiver or approval in accordance with Section 8.01(b) of the Indenture, provided that the Pass Through Trustee shall be entitled to receive an Opinion of Counsel (as defined in the Pass Through Agreement) necessary, in its sole discretion, to establish that the Indenture Trustee's consent would not be required under such circumstances. Section 17.05. Captions. The table of contents preceding this Agreement and the headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Section 17.06. Successors and Assigns. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Lessee and its successors and permitted assigns, the Subordination Agent and its successors and permitted assigns, the Owner Participant and its successors and permitted assigns, the Owner Trustee and its successors as Owner Trustee (and any additional owner trustee appointed), the Indenture Trustee and its successors as Indenture Trustee (and any additional indenture trustee appointed) under the Indenture, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional pass through trustee appointed) and the LC Bank and its successors and assigns. Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass Through Trustee. Each of SSB and FSB is entering into this Agreement solely in their respective capacities (except to the extent otherwise expressly indicated), in the case of SSB, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, in the case of FSB, not in its individual capacity but solely as Indenture Trustee under the Indenture and as Pass Through Trustee under the Pass Through Agreement, and except as otherwise expressly provided in this Agreement or in the Lease, the Indenture, the Pass Through Agreement or the Trust Agreement, neither SSB, nor FSB, shall be personally liable for or on account of its statements, representations, warranties, covenants or obligations under this Agreement; provided, however, that each of SSB and FSB accepts the benefits running to it under this Agreement, and each agrees that (except as otherwise expressly provided in this Agreement or any other Operative Agreement to which it is a party) it shall be liable in its individual capacity for (a) its own gross negligence or willful misconduct (whether in its capacity as trustee or in its individual capacity), (b) any breach of representations and warranties or any breach of covenants made in its individual capacity pursuant to or in connection with this Agreement or the other Operative Agreements to which it is a party, (c) any breach, in the case of the Owner Trustee, of its covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use ordinary care in receiving, handling and disbursing funds, (e) in the case of the Owner Trustee, Lessor's Liens attributable to it in its individual capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens and (g) taxes, fees or other charges on, or based on, or measured by, any fees, commissions or compensation received by it in connection with the transactions contemplated by the Operative Agreements. Section 17.08. 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17.09. Public Release of Information. Subject to applicable legal requirements (including, without limitation, securities laws requirements, other regulatory requirements and other legally compelled disclosures), so long as there shall not have occurred an Event of Default or Indenture Event of Default, each party to this Agreement shall in each instance obtain the prior written approval of each other party to this Agreement concerning the exact text and timing of news releases, articles and other information releases to the public media concerning any Operative Agreements. Section 17.10. Certain Limitations on Reorganization. The Indenture Trustee and the Pass Through Trustee agree that, if (i) the Owner Trustee becomes or all or any part of the Lessor's Estate or the trust created by the Trust Agreement becomes the property of, a debtor subject to the reorganization provisions of the Bankruptcy Code or any other applicable bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization provisions, the Owner Participant is held to have recourse liability to the debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on account of any amount payable as Make-Whole Premium, principal or interest on the Certificates, or any other amount payable on any Certificate that is provided in the Operative Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture Trustee actually receives any Recourse Amount which reflects any payment by the Owner Participant on account of (ii) above, then the Indenture Trustee, as the case may be, shall promptly refund to the Owner Participant such Recourse Amount. For purposes of this Section 17.10, "Recourse Amount" means the amount by which the portion of such payment by the Owner Participant on account of clause (ii) above received by the Indenture Trustee exceeds the amount which would have been received by the Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in (ii) above. Nothing contained in this Section shall prevent the Indenture Trustee from enforcing any individual obligation (and retaining the proceeds thereof) of the Owner Participant under this Agreement or any other Operative Agreement to the extent herein or therein provided, for which the Owner Participant has expressly agreed by the terms of this Agreement to accept individual responsibility. Section 17.11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS AND IS BEING DELIVERED IN NEW YORK. Section 17.12. Section 1110 Compliance. The parties hereto agree that the transactions contemplated by the Operative Agreements are expressly intended to be, shall be and should be construed so as to be entitled to the benefits and protection of Section 1110 of the Bankruptcy Code. Section 17.13. Reliance of Liquidity Providers. Each of the parties hereto agrees and acknowledges that each Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that each Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to such Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of each Liquidity Provider, their respective successors and permitted assigns. ARTICLE 18 CONFIDENTIALITY Section 18.01. Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, agents, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature, any non-public information supplied to it pursuant to this Agreement which is identified by the Person supplying the same as being confidential at the time the same is delivered to such party, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank examiners, auditors, insurance regulators, accountants or similar regulatory authorities, (iv) in connection with any litigation to which any one or more of the parties hereto is a party relating to the transactions contemplated hereby or by any of the Operative Agreements, (v) to a subsidiary or Affiliate of the parties hereto, (vi) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective party making such assignment an agreement in writing to be bound by the provisions of this Section 18.01 or (vii) in the case of the Owner Participant or the Owner Trustee (in its individual or trust capacity) to the Owner Trustee (in its individual or trust capacity) or to the Owner Participant, as the case may be. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed by their respective, duly authorized officers and this Participation Agreement shall be effective this ____ day of _____, 1998. LESSEE: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer INITIAL OWNER PARTICIPANT: FEDERAL EXPRESS CORPORATION By:__________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer OWNER TRUSTEE: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:__________________________________________ Name: Paul D. Allen Title: Vice President INDENTURE TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President PASS THROUGH TRUSTEE: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Pass Through Trustee By:__________________________________________ Name: Greg A. Hawley Title: Vice President SUBORDINATION AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as otherwise expressly provided herein, but solely as Subordination Agent By:__________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I CERTIFICATE INFORMATION 1. Federal Express Corporation 1998-1 Pass Through Trust Class A Federal Express Corporation Trust No. N682FE -------------------------------------------- Interest Rate: 6.720% Maturity: January 15, 2020 Principal Amount: $34,507,000 2. Federal Express Corporation 1998-1 Pass Through Trust Class B Federal Express Corporation Trust No. N682FE -------------------------------------------- Interest Rate: 6.845% Maturity: January 15, 2018 Principal Amount: $13,296,000 3. Federal Express Corporation 1998-1 Pass Through Trust Class C Federal Express Corporation Trust No. N682FE -------------------------------------------- Interest Rate: 7.020% Maturity: January 15, 2016 Principal Amount: $14,301,000 SCHEDULE II DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N682FE and Manufacturer's serial number 800, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N682FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on December 1, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N682FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 30, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N682FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE III PERMITTED COUNTRY LIST Australia Malaysia Austria Mexico Belgium Netherlands Canada New Zealand Denmark Norway Finland Philippines France Singapore Germany Spain Iceland Sweden Ireland Switzerland Japan United Kingdom Luxembourg SCHEDULE IV CERTAIN AMOUNTS Debt Portion $62,104,000 - ------------ Letter of Credit Maximum Stated Amount $5,500,000 - -------------------------------------- SCHEDULE V MANDATORY DOCUMENT TERMS Any amendment and restatement of the Operative Agreements on the Delivery Date or, if earlier, the Transfer Date: 1. May not modify in any material adverse respect the Granting Clause of the Indenture so as to deprive the Holders 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 Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Article II, V, VI or VIII or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 of the Indenture; 2. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 3.05, 3.06, 11.03(a)(x), 13.01(c)(i), the second sentence of 19.01, 20.01, 22.01, 22.03, 26.03, 27.01 or 27.02 of the Lease or otherwise modify the terms of the Lease so as to deprive the Indenture Trustee of rights expressly granted to the "Indenture Trustee" therein; 3. May not modify in any material adverse respect as regards the interests of the Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section 4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the provisions of Section 4.02(d) of the Participation Agreement so as to eliminate the requirement to deliver to the Indenture Trustee 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 6.03(b) of the Participation Agreement as regards the rights of the Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes; and 4. May not modify in any material adverse respect as regards the interests of the holders of the Pass Through Certificates, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the definition of "Make-Whole Premium" or "Supplemental Rent" in Schedule II to the Participation Agreement. 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 Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the holders of the Pass Through Certificates. SCHEDULE VI MANDATORY ECONOMIC TERMS Certificates: Loan to Aircraft Value Ratio on any Payment Date (with the value of the Aircraft set forth in Appendix IV to the Prospectus Supplement (as defined in the Pass Through Agreement) shall be as follows: Series A: not in excess of 40% Series B: not in excess of 55% Series C: not in excess of 75% Average Life: The average life may not be more than 15.5 years in the case of the Series A Certificates, 13.5 years in the case of the Series B Certificates and 12.5 years in the case of the Series C Certificates (but in each case may be decreased by any amount). As of the first Payment Date following the Last Delivery Date, the average life may not be more than 15.0 years in the case of the Pass Through Certificates, 1998-1-A, 13.0 years in the case of the Pass Through Certificates, 1998-1-B and 12.0 years in the case of the Pass Through Certificates, 1998-1-C. Final Maturity Date: Series A: may not be extended beyond January 15, 2022 Series B: may not be extended beyond January 15, 2019 Series C: may not be extended beyond January 15, 2016 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) shall be as follows: Series A: 6.720% Series B: 6.845% Series C: 7.020% Past Due Rate: Debt Rate plus 2% per annum. Payment Dates: January 15 and July 15. Make-Whole Premium: As provided in Article V of the Indenture. Redemption and Purchase: As provided in the Indenture. Lease Term: The Basic Term shall expire by its terms on or after final maturity date of the Series A Certificates. Rent Payment Dates: January 15 and July 15. 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 Certificates prior to such Date), the aggregate principal amount of scheduled installments due on the Certificates outstanding on such Payment Date. Supplemental Rent: Shall be sufficient to cover the sums described in the definition of such term in Schedule II to the Participation Agreement. Stipulated Loss Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Stipulated Loss Value may not be modified. Termination Value: At all times shall be equal to or greater than the outstanding principal amount of the Certificates together with accrued interest thereon. The interest rate payable with respect to Termination Value Date may not be modified. All-risk hull insurance: Shall not be less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Article 13 of the Lease. Minimum Liability Insurance Amount: $300,000,000. Past Due Rate: As set forth in the definition thereof in Schedule II to the Participation Agreement. Participation Agreement The Indenture Trustee, the Subordination Agent and the Liquidity Providers indemnified against Expenses and Taxes to the extent set forth in Articles 8 and 9 of the Participation Agreement as in effect on the Certificate Closing Date. EXHIBIT A(1)(a)(i) [Letterhead of Federal Express] [Certificate Closing Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates will be issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, (i) executed counterparts of the Pass Through Agreement, the Series Supplements and the Operative Agreements to be delivered on the Certificate Closing Date (the "Certificate Closing Date Documents") and (ii) the forms of the Operative Agreements to be delivered on the Delivery Date. We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Certificate Closing Date Documents, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Certificate Closing Date Documents, other than Federal, has full power, authority and legal right to enter into such Certificate Closing Date Documents and that each such Certificate Closing Date Document has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Certificate Closing Date Documents to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Certificate Closing Date Documents to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. Each of the Certificate Closing Date Documents to which Federal is to be a party and which are to be executed on the Delivery Date has been duly authorized by Federal. 4. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Certificate Closing Date Documents to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which are required to be performed on or prior to the Certificate Closing Date and which shall have been accomplished on or prior to the Certificate Closing Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (ii) compliance with the securities laws of each applicable state, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Certificate Closing Date Documents. 7. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 8. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 9. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Certificate Closing Date Documents to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Certificate Closing Date Documents, the governing law with respect to each of the Certificate Closing Date Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(a)(ii) [Letterhead of Federal Express] [Delivery Date] To the Addressees Listed on Schedule A Attached Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Federal Express Corporation, a Delaware corporation ("Federal"), and am familiar with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of ________________ (the "Participation Agreement"), among Federal, as Lessee and Initial Owner Participant, ____________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(i) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of a portion of the Owner Trustee's payment of the Purchase Price of one Airbus A300F4-605R aircraft (the "Aircraft"), using the proceeds from the public offering of the Pass Through Certificates. Three Classes of Pass Through Certificates were issued by three Pass Through Trusts formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that were issued under the Indenture, as supplemented by the related Indenture and Security Agreement Supplement. In connection with the opinions expressed below, I have examined, or caused to be examined by attorneys under my supervision, executed counterparts of the Operative Agreements, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as in our judgment are relevant to rendering the opinions expressed below. As to any facts material to the opinions expressed below (other than any thereof relating to Federal), we have relied upon the representations and warranties made in the Transaction Agreements, the accuracy of which we have not independently investigated or verified. In such examination, we have assumed the genuineness of all signatures (other than the signatures of Federal) and 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 each of the parties to each of the Transaction Agreements, other than Federal, has full power, authority and legal right to enter into such Transaction Agreements and that each such Transaction Agreement has been duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: 1. Federal is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Transportation Code, and has or had, on the date of execution thereof, the corporate power and authority to carry on its business as currently conducted and to enter into and perform its obligations under the Transaction Agreements to which it is a party. Federal is duly qualified to do business and is in good standing in the State of Tennessee and each other state of the United States in which its operations or the nature of its business requires Federal to so qualify, except where the failure to so qualify would not have a material adverse impact on Federal or its business. 2. Federal possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such certificate, franchise, license, permit, right and concession and consent is in full force and effect. 3. Each of the Transaction Agreements to which Federal is a party has or had, on the date of execution thereof, been duly authorized, executed and delivered by Federal and each constitutes the legal, valid and binding obligation of Federal enforceable against Federal in accordance with its terms. 4. Neither the execution and delivery by Federal of the Transaction Agreements to which Federal is a party, nor the consummation of any of the transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did at the time of execution and delivery, or does presently (a) require any stockholder approval or violate the certificate of incorporation or by-laws of Federal or (b) conflict with or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 6.01(a) of the Lease) upon the property of Federal under any law, governmental rule or regulation, or the charter or bylaws of Federal or any order, writ, injunction or decree of any court or governmental authority against Federal or by which any of its properties may be bound or any indenture, mortgage, contract or other agreement known to me to which Federal is a party or by which it may be bound or, require the approval or consent of any trustee or the holders of any indebtedness or obligations of Federal. 5. Neither the execution and delivery by Federal of the Transaction Agreements to which it is a party, nor the consummation of any transactions by Federal contemplated thereby, nor the performance of the obligations thereunder by Federal, did or does, as the case may be, (a) require the consent or approval of, the giving of notice to, or (except as described or contemplated in the Participation Agreement and the Lease, all of which were or are required to be performed on or prior to the Delivery Date and which were or shall have been accomplished on or prior to the Delivery Date) the registration with, or the taking of any other action in respect of, the Aeronautics Authority, the Securities and Exchange Commission or any other authority or agency of the federal government or of the State of Tennessee other than (i) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (ii) compliance with the securities laws of each applicable state and (iii) the filings and recordings referred to in paragraph 7 below, or (b) contravene any judgment or order applicable to or binding on Federal or any law or governmental rule or regulation of the United States or of the State of Tennessee. 6. There is no pending or, to my knowledge, threatened action or proceeding before any court or administrative agency which individually (or in the aggregate in the case of any group of related lawsuits) (i) is expected to have a material adverse effect on (A) the financial condition of Federal except for the matters described (a) under "Legal Proceedings" in Federal's Annual Report on Form 10-K for the fiscal year ended May 31, 1997 (as updated by Note 7 to the financial statements included in Federal's Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, November 30, 1997 and February 28, 1998), and (b) in Federal's Current Report on Form 8-K dated June 11, 1997, as to all of which I can express no opinion at this time concerning Federal's liability (if any) or the effect of any adverse determination upon the business, condition (financial or otherwise) or operations of Federal, or (B) the ability of Federal to perform its obligations under the Transaction Agreements, or (ii) involves the Aircraft. 7. Except for the registration in the Owner Trustee's name of the Aircraft pursuant to the Transportation Code, and except for the filing and, where appropriate, recording, pursuant to the Transportation Code of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), no further action, including any filing or recording of any document is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against Federal and any third parties, or to perfect the first mortgage lien on the Aircraft in favor of the Indenture Trustee in each case with respect to such portion of the Aircraft as is covered by the recording system established by the Transportation Code. 8. Federal is a duly certificated "air carrier" within the meaning of the Transportation Code, and a holder of a certificate under Sections 41102(a) and 41103 of the Transportation Code, and an "air carrier operating certificate" issued under Chapter 447 of the Transportation Code for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 9. On the date hereof the Owner Trustee received good and valid title to the Aircraft free and clear of all liens on file with the FAA, except for Liens permitted under Section 6.01(a) of the Lease. 10. Federal's principal place of business and chief executive office (as such term is defined in the Uniform Commercial Code in effect in the State of Tennessee) are located at 2005 Corporate Avenue, Memphis, Shelby County, Tennessee. 11. Federal is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The opinions expressed in paragraph 3 above as to the enforceability of the Transaction Agreements to which Federal is a party are based upon the assumption for purposes of such opinions and without independent analysis that, notwithstanding the respective choice of laws clauses in the Transaction Agreements, the governing law with respect to each of the Transaction Agreements is identical in all relevant respects to the law of the State of Tennessee. Insofar as the foregoing opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally (whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Lease may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Lease or make such remedies inadequate for the practical realization of the benefits intended to be provided thereby. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Delaware and the laws of the State of Tennessee. As to the matters referred to in paragraphs 5, 7 and 9, I have relied on the opinion of Daugherty, Fowler & Peregrin of even date herewith, to the extent such matters are addressed in such counsel's opinion and subject to the assumptions and qualifications expressed therein. This opinion is delivered to you solely for your use in connection with the transaction described herein, and may not be used for any other purpose, and may not be relied upon by any other person, without my prior written consent. Very truly yours, SCHEDULE A Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(1)(b)(i) [Letterhead of Davis Polk & Wardwell] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.01(j)(iv) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus A300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates will be issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Certificate Closing Date Documents"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. Assuming (i) the due authorization, execution and delivery of the Certificate Closing Date Documents by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Certificate Closing Date Documents, (iii) that the execution, delivery and performance by each of the Certificate Closing Date Documents by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates to be issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates to be issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Certificate Closing Date Document is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Certificate Closing Date Document in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create, except that no opinion is given with respect to perfection of such security interest on the date hereof; (C) the Certificates, when issued to and acquired by the Pass Through Trustee, will be legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and will be entitled to the benefits of the Indenture, including the benefit of the security interest created thereby, except that no opinion is given with respect to perfection of such security interest on the date hereof; (D) the Pass Through Certificates, when issued to and acquired by the Underwriters in accordance with the Underwriting Agreement, will be legal, valid and binding obligations of the Pass Through Trustee enforceable against the Pass Through Trustee in accordance with their terms and will be entitled to the benefits of the Pass Through Agreement and the Series Supplement relating thereto; and (E) the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders. 2. (a) Each of the Certificate Closing Date Documents to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. Each of the Operative Agreements to which Federal Express is to be a party and which are to be delivered on the Delivery Date has been authorized by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Certificate Closing Date Documents to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 2(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Certificate Closing Date Documents. 3. The execution, delivery and performance of the Certificate Closing Date Documents (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 3 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Certificate Closing Date Documents. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 4. It is not necessary, in connection with the creation of the beneficial interest of the Initial Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinion of Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. (c) The opinion contained in paragraph 1(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(1)(b)(ii) [Letterhead of Davis Polk & Wardwell] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel for Federal Express Corporation, a Delaware corporation ("Federal Express"), in connection with the transactions contemplated by the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of ___________ (the "Participation Agreement"), among Federal Express, as Lessee and Initial Owner Participant, _________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, relating to the Aircraft. This opinion is being delivered pursuant to Section 4.02(d)(ii) of the Participation Agreement. Capitalized terms not otherwise defined herein have the meanings assigned thereto in the Participation Agreement. The Participation Agreement provides, among other things, for the financing on the Delivery Date of the Owner Trustee's payment of a portion of the Purchase Price of one Airbus 300F4-605R Aircraft (the "Aircraft") using the proceeds from the public offering of the Pass Through Certificates. On the Certificate Closing Date, three Classes of Pass Through Certificates were issued by separate Pass Through Trusts, each formed to acquire, among other securities, the Certificates bearing a particular interest rate and having a particular Maturity issued under the Indenture. The Aircraft is to be leased to Federal Express by the Owner Trustee pursuant to the Lease and subjected to the Lien of the Indenture, and is to be delivered by the Owner Trustee to the Lessee on this date, and in connection with the delivery of the Aircraft, the Owner Trustee and Federal Express will execute and deliver the Lease Supplement, and the Owner Trustee will execute and deliver the Indenture and Security Agreement Supplement. In connection with the opinions expressed below, we have examined executed counterparts of the Operative Agreements, the Pass Through Certificates, the Pass Through Agreement and each Series Supplement (the "Transaction Agreements"). We have also examined originals, or copies certified to our satisfaction, of such other agreements, documents, certificates and statements of governmental officials and corporate officers as we have deemed necessary or advisable as a basis for such opinions. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to any facts material to our opinions expressed below, we have, with your consent, relied on the representations and warranties made in or pursuant to the Participation Agreement and the other documents referred to therein, the accuracy of which we have not independently verified. In addition, we have, when relevant facts were not independently established by us, relied, to the extent we deemed such reliance proper, upon certificates of public officials and certificates, telegrams and other written or telephoned statements of officers of the parties referred to herein. Based on the foregoing, it is our opinion that: 1. With respect to that portion, if any, of the Aircraft and the other property included in the Lessor's Estate as may not be covered by the recording system established by the FAA pursuant to Section 44107 of the Transportation Code, no filing or recording of any document or other action was or is necessary in order to establish the Owner Trustee's title thereto and interest therein as against Federal Express and any third parties. 2. Subject to execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement for the Aircraft and to the registration of the Aircraft with the FAA in the name of the Owner Trustee, the Lease, as supplemented, will create a valid leasehold interest in the Aircraft, the entitlement thereof to the benefits of recordation under the Transportation Code being subject to the due and timely filing and, where appropriate, recording of (A) AVSA's FAA Bill of Sale, (B) the Trust Agreement, (C) the Lease (with the Lease Supplement covering the Aircraft, the Indenture and the Indenture and Security Agreement Supplement covering the Aircraft attached as exhibits) and (D) the Indenture (with the Indenture and Security Agreement Supplement covering the Aircraft attached as an exhibit), pursuant to the Transportation Code, and assuming that at the time of such filing no other documents relating to the Aircraft have been filed pursuant to the Transportation Code. 3. Assuming (i) the due authorization, execution and delivery of the Transaction Agreements by each of the parties to each such document (other than Federal Express), (ii) each such party has full power and legal right to enter into and perform its respective obligations under the Transaction Agreements, (iii) that the execution, delivery and performance by each of the Transaction Agreements by each of the parties thereto will not violate the respective parties' constituent documents, (iv) the due authorization, execution, issuance and delivery by the Owner Trustee, and the due authentication by the Indenture Trustee, of the Certificates issued under the Indenture in accordance with the terms of the Indenture, (v) the due authorization, execution, issuance, delivery and authentication by the Pass Through Trustee of the Pass Through Certificates issued under the Pass Through Agreement and the Series Supplement relating to such Pass Through Certificates, in each case in accordance with the terms of the Pass Through Agreement and such Series Supplement, and (vi) that the form of each Transaction Agreement is in compliance with all applicable laws and governmental rules and regulations (other than the laws of the United States and the State of New York), then: (A) to the extent governed by New York law, each Transaction Agreement in form constitutes a legal, valid and binding agreement of each party thereto enforceable against each such party in accordance with its terms; (B) the Indenture creates, for the benefit of the Holders, the security interest in the Trust Indenture Estate that it purports to create; (C) the Certificates are legal, valid and binding obligations of the Owner Trustee enforceable against the Owner Trustee in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture, including the benefit of the security interest created thereby; and (D) the beneficial interest of the Owner Participant under the Trust Agreement in and to the properties which are part of the Trust Indenture Estate is subject, to the extent provided in the Indenture, as supplemented by the Indenture and Security Agreement Supplement, to the Lien of the Indenture in favor of the Holders. The opinions set forth in this paragraph 3 are subject to the due filing and, where appropriate, recording with the FAA of the documents referred to in paragraph 2 above. 4. (a) Each of the Transaction Agreements to which Federal Express is a party has been duly authorized, executed and delivered by Federal Express. (b) The execution, delivery and performance by Federal Express of each of the Transaction Agreements to which Federal Express is a party do not, or did not on the date of execution thereof, violate, and fully comply, or did fully comply on the date of execution thereof, with, any laws and governmental rules and regulations of the State of New York that may be applicable to Federal Express. The opinion set forth in this paragraph 4(b) is rendered without regard to the taking of any action or the conduct of any other business by Federal Express in the State of New York other than the transactions contemplated by the Transaction Agreements. 5. The execution, delivery and performance of the Transaction Agreements (other than the Certificates) by the Owner Trustee in its individual or trust capacity, as the case may be, and the issuance, execution, delivery and performance of the Certificates by the Owner Trustee in its trust capacity do not violate, and fully comply with, any laws and governmental rules and regulations of the State of New York that may be applicable to the Owner Trustee in its individual or trust capacity, as the case may be. The opinion set forth in this paragraph 5 is rendered without regard to the effect, if any, on such issuance (in the case of the Certificates), execution, delivery or performance, of the taking of any action, the conduct of any business or the exercise of any other powers by State Street Bank and Trust Company of Connecticut, National Association in its individual or trust capacity in the State of New York not related to the transactions contemplated by the Transaction Agreements. We have assumed that State Street Bank and Trust Company of Connecticut, National Association has made the filings necessary to comply with Section 131.3 of the Banking Law of the State of New York, however we express no opinion as to whether State Street Bank and Trust Company of Connecticut, National Association is required to comply with said Section 131.3. 6. All the properties which are part of the Trust Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture in and to the Aircraft and the Lease) have been pledged and mortgaged with the Indenture Trustee as part of the Trust Indenture Estate (subject to the due filing and, where appropriate, recording of those documents referred to in paragraph 2 above and the financing statement referred to in Section 4.02(f) of the Participation Agreement), and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the Lien of the Indenture in favor of the Holders of the Certificates issued and to be issued under the Indenture. 7. The Indenture and Security Agreement Supplement, pursuant to the Granting Clause of the Indenture, creates, as security for the Certificates duly issued and to be issued under the Indenture, the first priority security interest in the Aircraft it purports to create, the perfection and rank thereof being subject to the registration with the FAA of the Aircraft in the name of the Owner Trustee and the due filing and, where appropriate, recording in accordance with the Transportation Code of the documents referred to in paragraph 2 above. We express no opinion with respect to the status of any security interest in any portion of the Aircraft which does not constitute an "aircraft" or "aircraft engine", as defined in paragraphs (6) and (7) of Section 40102(a) of the Transportation Code. 8. Except for (i) the filings and recordings referred to in paragraph 2 above, (ii) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act and (iii) compliance with the securities laws of each applicable state, neither the execution and delivery by Federal Express of the Participation Agreement or any other Operative Agreement to which it is a party, nor the consummation of any of the transactions by Federal Express contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, the Securities and Exchange Commission or any other Federal or New York State governmental authority. 9. It is not necessary, in connection with the creation of the beneficial interest of the Owner Participant in the Trust Indenture Estate under the circumstances contemplated by the Participation Agreement to register such beneficial interest under the Securities Act of 1933, as amended, or to qualify the Trust Agreement or the Indenture under the Trust Indenture Act of 1939, as amended. 10. The Indenture Trustee on behalf of the holders of the Certificates will be entitled to the benefits of Section 1110 of the United States Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which Federal Express is a debtor. We note that a recent decision by the United States District Court for the District of Colorado in connection with the Western Pacific Airlines, Inc. bankruptcy suggests that the protections of Section 1110 become unavailable to the lessor or security interest holder once the bankruptcy trustee or debtor-in-possession, within the 60 day period following the date of commencement of the reorganization proceedings, agrees to perform the debtor's obligations that become due on or after such date and cures outstanding defaults, with the result, among others, that the ability of a lessor or security interest holder to exercise remedies based on a subsequent default would be subject to the automatic stay. We believe that this holding is erroneous because it is inconsistent with the overriding purpose of Section 1110 to protect lessors of, and creditors secured by, qualifying aircraft against being stayed from exercising their rights while defaults under their leases or financing agreements remain uncured. The foregoing opinions are subject to the following qualifications: (a) We have relied, with your consent, without independent investigation and verification and subject to the assumptions and qualifications contained therein, upon the opinions of Daugherty, Fowler & Peregrin and Karen M. Clayborne, Senior Vice President and General Counsel of Federal Express to be delivered to you and dated the date hereof, for purposes of the matters covered thereby. (b) We are qualified to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, any laws other than the laws of the State of New York, the laws of the United States and the General Corporation Law of the State of Delaware. We express no opinion as to any matters involving aviation law. (c) The opinion contained in paragraph 3(A) above as to enforceability is subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity which may affect the remedies provided in the agreements referred to in said opinions, which laws and principles, however, do not in our opinion make the remedies provided in said agreements inadequate for the practical realization of the benefits of the security intended to be provided thereby. (d) This opinion is rendered solely to you at Federal Express's request in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(2) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N682FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(ii) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Participation Agreement; (b) The Indenture; (c) The Collateral Account Control Agreement; and (d) The Certificates. (each of the documents identified in paragraphs (a) through (d) above are collectively referred to as the "Indenture Trustee Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Indenture Trustee Documents. 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. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers, and each of First Security and the Indenture Trustee, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Indenture Trustee Documents to which it is or is to be a party and to authenticate the Certificates delivered on the Certificate Closing Date. 2. Each of First Security and the Indenture Trustee, as the case may be, has duly authorized, executed and delivered each Indenture Trustee Document to which it is a party; each such document constitutes a legal, valid and binding obligation of the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, of First Security) enforceable against the Indenture Trustee (and, to the extent set forth in the respective Indenture Trustee Document, against First Security) in accordance with its terms. 3. The Certificates issued and dated the Certificate Closing Date have been duly authenticated and delivered by the Indenture Trustee pursuant to the terms of the Indenture. 4. Neither the authorization, execution and delivery by the Indenture Trustee or First Security, as the case may be, of the Indenture Trustee Documents, nor the authentication and delivery by the Indenture Trustee of the Certificates nor the fulfillment or compliance by the Indenture Trustee or First Security with the respective terms and provisions thereof nor the consummation of any of the transactions by the Indenture Trustee or First Security, as the case may be, contemplated thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any court or administrative or governmental authority or agency of the State of Utah or the United States of America governing the banking or trust powers of First Security. 5. The execution, delivery and performance by the Indenture Trustee or First Security, as the case may be, of each of the Indenture Trustee Documents and the authentication and delivery of the Certificates by the Indenture Trustee are not in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 6. There are no fees, taxes or other governmental charges payable by the Owner Trustee, the Indenture Trustee (except taxes imposed on fees payable to First Security) or the Certificate Holders to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance of any of the Operative Agreements or in connection with the issuance and acquisition of the Certificates by the Certificate Holders or the beneficial interests of the Certificate Holders in the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. Neither the Indenture Trustee nor the trust created under the Indenture will be subject to any fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Indenture Estate solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. There is no fee, tax or other governmental charge (except for taxes imposed on fees payable to First Security) under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof, on, based on or measured by any payments under the Certificates by reason of the creation of the trust under the Indenture solely because First Security (a) has its principal place of business in the State of Utah, (b) performs (in its individual capacity or as Indenture Trustee) any or all of its duties under the Indenture Trustee Documents in the State of Utah, and (c) engages in any activities unrelated to the transactions contemplated by the Indenture Trustee Documents in the State of Utah. We express no opinion as to whether or not any fees, taxes or other charges are now or hereafter may be payable by the Initial Owner Participant to the State of Utah or any political subdivision thereof in connection with (a) the execution, delivery or performance by any of the Indenture, the Participation Agreement or any of the other Operative Agreements and (b) the making by the Owner Participant of its investment in the Aircraft. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security or the Indenture Trustee, as the case may be, or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security or the Indenture Trustee, as the case may be, to perform its obligations under any of the Indenture Trustee Documents, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security or the Indenture Trustee, as the case may be, in connection with the transactions contemplated by any of the Indenture Trustee Documents. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Indenture Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Indenture Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Indenture Trustee, of the Indenture Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Indenture Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(i) [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 between State Street and Federal Express Corporation, as Initial Owner Participant ("Initial Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee"); the Initial Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.01(j)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Initial Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Initial Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 13 and 14 below, the enforceability of any obligation of State Street, the Owner Trustee and the Initial Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or Initial Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 13 and 14 below, we have assumed that the Initial Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Initial Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 3. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 4. Assuming the due authorization, execution and delivery of the Trust Agreement by the Initial Owner Participant and that the Initial Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Initial Owner Participant, enforceable against the Initial Owner Participant in accordance with the terms thereof. 5. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 6. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Initial Owner Participant as provided therein and creates for the benefit of the Initial Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 7. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 8. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 9. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 10. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Initial Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Initial Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 11. To our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 12. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Initial Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 13. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Initial Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 14. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Initial Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau [Letterhead of Bingham Dana LLP] [Certificate Closing Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as special Connecticut counsel to the Owner Trustee in connection with the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Indenture") between First Security Bank, National Association (the "Indenture Trustee"), and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, but solely as Owner Trustee (the "Owner Trustee"), and the Collateral Account Control Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Control Agreement"), among the Owner Trustee, the Indenture Trustee and State Street Bank and Trust Company, as Custodian (the "Custodian"). We are issuing this opinion solely in our capacity as counsel to the Owner Trustee under the circumstances set forth in this paragraph and solely as to the matters set forth herein. Pursuant to the Indenture, the Owner Trustee purports to grant to the Indenture Trustee a security interest, inter alia, in those securities and instruments, presently owned or hereafter acquired by the Owner Trustee, that are from time to time credited to an account numbered ______ (the "Collateral Account") established by the Owner Trustee with the Custodian and which securities and instruments the Owner Trustee has directed the Custodian to identify on the books and records of the Custodian as being subject to a security interest in favor of the Indenture Trustee to secure the payment to the Indenture Trustee of the Owner Trustee's obligations (the "Obligations") under the Indenture. Those securities and instruments which the Owner Trustee has directed the Custodian to so identify on the books of the Custodian as being subject to such security interest, and which, at the time of reference thereto, have been so identified and have not been substituted by other property or otherwise withdrawn from such identification or the Collateral Account, are hereinafter referred to, collectively, as the "Liquid Collateral." We have assumed with your permission for purposes of this opinion that the Liquid Collateral consists solely of assets constituting (a) a "security" or "security entitlement," as each such term is defined in Section 8-102 of the Uniform Commercial Code as currently in effect in the State of Connecticut (the "Connecticut UCC"), (b) a "securities account" (as such term is defined in Section 8-501 of the Connecticut UCC), (c) a "financial asset," (as such term is defined in Section 8-102 of the Connecticut UCC), held in a securities account and (d) "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC). For purposes of this opinion, we have examined the Indenture, the Control Agreement and such other documents and instruments as are referred to as having been examined by us for purposes of our opinion letter dated the date hereof, addressed to the parties listed on Schedule A hereto. As to all matters of fact, we have examined and have relied entirely upon the representations and warranties contained in and made pursuant to the Indenture and the Control Agreement, without any independent investigation of any kind. We have assumed the genuineness of all signatures (other than those on behalf of the Owner Trustee and the Custodian), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each individual executing any document (other than on behalf of the Owner Trustee and the Custodian). For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in the State of Connecticut and, where applicable, the federal laws of the United States of America, in each case without regard to choice of law. No opinion is given as to the choice of law which any tribunal may apply to the transactions referred to herein. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) We have assumed without any independent investigation that each party to the transactions contemplated by the Indenture or the Control Agreement at all times relevant thereto (other than the Owner Trustee) was duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or organized, and had and has the full power, authority and legal right under its certificate of incorporation, articles of organization and other governing documents, corporate or other enterprise legislation and applicable laws, as the case may be, to execute and deliver and perform its obligations under all documents executed by it in connection with those transactions. (b) We have assumed without any independent investigation (i) the due authorization, execution and delivery of each of the Indenture and the Control Agreement by the Indenture Trustee, (ii) that the execution, delivery and performance by the Indenture Trustee of each of the Indenture and the Control Agreement does not and will not conflict with, or result in a breach of, the terms, conditions or provisions of, or result in a violation of, or constitute a default or require any consent (other than such consents as have been duly obtained) under, any organizational document, any order, judgment, arbitration award or stipulation, or any agreement, to which the Indenture Trustee is a party or is subject or by which any of the properties or assets of the Indenture Trustee is bound, (iii) that the Owner Trustee has received "value," as defined under the Connecticut UCC, for the incurrence of the Obligations, (iv) that, whenever the Custodian receives instructions from the Owner Trustee for the Custodian to note on its books and records that any securities or instruments credited to the Collateral Account are to be subject to a security interest in favor of the Indenture Trustee to secure the payment of the Obligations, such instructions will have been duly authorized by or on behalf of the Owner Trustee and (v) that, when the Indenture Trustee is to act in connection with any of the transactions contemplated by the Indenture, it is acting in its capacity as Indenture Trustee. (c) We have made no examination of, and no opinion is given herein as to, the Owner Trustee's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, the Liquid Collateral, other than the security interest in favor of the Indenture Trustee as contemplated by the Indenture and the Control Agreement, and have assumed that the Owner Trustee has, or at the time of any purported attachment of the security interest in the relevant Liquid Collateral will have, rights in the Liquid Collateral. (d) We point out that, pursuant to Part 357 of Title 31 of the United States Code of Federal Regulations ("CFR"), with respect to United States "book-entry Treasury securities" maintained by a Federal Reserve Bank and, pursuant to other relevant sections of the CFR, with respect to various other securities issued or guaranteed by the federal government of the United States or an agency thereof or a corporation sponsored thereby and maintained by a Federal Reserve Bank, the perfection of security interests granted by commercial, non-governmental parties in book-entry Treasury securities, or such other federal securities, as the case may be, held in a securities account of a participant financial institution, such as the Custodian, maintaining such account with such Federal Reserve Bank, will be governed by the law of the jurisdiction determined in accordance with Section 357.11 of Title 31 of the CFR. If that jurisdiction has not adopted Revised Article 8, then such jurisdiction will be deemed to have adopted Revised Article 8 for purposes of determining the law governing such perfection. We confirm that Revised Article 8 has been enacted by Connecticut as part of the Connecticut UCC and that Revised Article 8 is currently in effect in Connecticut. (e) We have also assumed that (i) any securities comprised in the Liquid Collateral and held by Depository Trust Company or another clearing corporation will be held by Depository Trust Company or such other clearing corporation for the direct account of the Custodian and not for the account of the Custodian through any other securities intermediary, and (ii) any securities comprised in the Liquid Collateral consisting of "book-entry Treasury securities" or other uncertificated federal securities will be credited to a direct account of the Custodian with a Reserve Bank (as such term is defined in the relevant section of the CFR) and not for the account of the Custodian through a securities intermediary. (f) We do not express any opinion as to the attachment or perfection of any security interest in (i) any securities that are maintained with, or held on the system of, Cedel S.A., or any like maintenance, clearing or settlement system operating outside of the United States of America, (ii) the Collateral Account, to the extent that the Collateral Account constitutes an asset, other than general intangibles, separate from the property credited thereto, (iii) any Liquid Collateral which, at the time of reference thereto, is no longer identified as subject to a security interest in favor of the Indenture Trustee or has otherwise been withdrawn from the Collateral Account, or (iv) any identifiable proceeds of any Liquid Collateral following the lapse of the ten day period set forth in Section 9-306(3) of the Connecticut UCC, to the extent that such proceeds do not constitute securities, security entitlements, financial assets or general intangibles in which a security interest is perfected in the manner contemplated by this opinion, as if such proceeds were original Liquid Collateral. (g) We express no opinion as to the priority of such security interest over any other or competing interest in or claims against such Liquid Collateral. (h) We have assumed that (i) the Custodian, in the ordinary course of business, accepts for deposit securities as a service for its customers, maintains securities accounts in the names of such customers reflecting ownership of or interests in such securities, and, in regard to the transactions contemplated by the Indenture, is acting in such capacity, (ii) all securities or other financial assets from time to time credited to the Collateral Account and to be comprised in the Liquid Collateral will have been credited to the Collateral Account in such a way as to create security entitlements in favor of the Owner Trustee, (iii) the records of the Custodian indicate and will, at the time of reference thereto, indicate that the aggregate amount of each security or other financial assets comprised in the Liquid Collateral, together with all other such securities or other financial assets carried by the Custodian for its customers and for its proprietary account, is at least equal to the aggregate amount of such security or other financial assets carried by it for its customers and for its proprietary account, (iv) the books and records of the Custodian indicate and will, at the time of reference thereto, indicate that the securities or other financial assets to be comprised in the Liquid Collateral are registered on the books and records of the Custodian as being for the beneficial account of the Owner Trustee, subject to, as identified on such books and records, the security interest therein in favor of the Indenture Trustee, and (v) the assumptions contained in this paragraph are in accordance with laws and regulations currently in effect as applicable to the Custodian. (j) In so far as our opinion relates to the enforceability of any obligations of the Owner Trustee, the enforcement of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium, marshalling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to (i) the status under Section 548 of the Bankruptcy Code and applicable state fraudulent conveyance laws of the obligations of the Owner Trustee under the Indenture or interests purported to be granted pursuant to the Indenture, (ii) the enforceability of any particular provision of the Indenture relating to remedies after default or as to the availability of any specific or equitable relief of any kind (and we point out that the enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity, and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner), (iii) the enforceability of any particular provision of the Indenture relating to (A) waivers of defenses, of rights to trial by jury, or rights to object to jurisdiction or venue and other rights or benefits bestowed by operation of law, (B) the effect of suretyship defenses, or defenses in the nature thereof, with respect to obligations of any applicable guarantor, joint obligator or surety, (C) waivers of provisions which are not capable of waiver under Sections 1-102(3) and 9-501(3) of the Connecticut UCC, (D) the grant of powers of attorney to the Indenture Trustee, (E) exculpation clauses, indemnity clauses and clauses relating to releases or waivers of unmatured claims or rights, (F) interest or other charges that may be usurious under applicable law, or (G) the collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or (iv) as to the availability of any specific or equitable relief of any kind. However, notwithstanding the qualification set forth in the foregoing clause (ii), and excluding the parenthetical in that clause, subject to the other exceptions, qualifications and limitations set forth in this opinion (including the parenthetical in clause (ii)) and subject to the fact that there may be economic consequences arising out of any procedural or other delay on account of the limitation or unenforceability of any particular provision of the Indenture relating to remedies after default, such limitation or unenforceability does not, in our judgment, render the provisions of the Indenture and the Control Agreement relating to remedies after default, taken as a whole, inadequate for the practical realization of the benefits of enforcement of a security interest in the Liquid Collateral following the receipt by the Custodian of an enforcement notice properly given under the Indenture and the Control Agreement by the Indenture Trustee to the Custodian with respect to such Liquid Collateral. (k) With respect to property as to which the security interest purported to be granted pursuant to the Indenture attaches after the date hereof, we call to your attention that Section 552 of the Bankruptcy Code limits the extent to which assets acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We further call to your attention that under Section 547 of the Bankruptcy Code, a security interest that attaches within the relevant period set forth in Section 547(b)(4) of the Bankruptcy Code may be avoidable under certain circumstances. Based upon and subject to the foregoing, we are of the opinion that: 1. The Indenture Trustee has, under the terms of the Connecticut UCC and, in the case of book-entry Treasury securities, under the CFR, a perfected security interest in the Liquid Collateral that constitutes a "security," "security entitlement" or "financial asset" (as each such term is defined in the Connecticut UCC), and in the identifiable proceeds thereof to secure the payment of the Obligations. 2. The Indenture creates, under the terms of the Connecticut UCC, a valid security interest in such of the Liquid Collateral that constitutes "general intangibles" (as such term is defined in Section 9-106 of the Connecticut UCC) and in the identifiable proceeds thereof to secure the payment of the Obligations. Upon the filing of a financing statement on form UCC-1 pursuant to the Connecticut UCC with the Secretary of State of the State of Connecticut naming the Owner Trustee as Debtor and the Indenture Trustee as Secured Party and accurately describing the Liquid Collateral and the Collateral Account, which filing has been duly effected, such security interest will be perfected (to the extent that the perfection of a security interest in the Liquid Collateral can be accomplished by the filing in Connecticut of financing statements under the Connecticut UCC). We point out that: (a) The effectiveness of a financing statement will lapse (i) on the expiration of a five-year period from their dates of filing, or (if later) five years from the last date as to which such financing statements were effective following the proper filing of continuation statements with respect thereto, unless continuation statements are filed within six months prior to the expiration of the applicable five-year period, (ii) with respect to general intangibles in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, for a period of more than four months after the debtor has changed its location from that jurisdiction to a new jurisdiction unless such security is perfected in the new jurisdiction within the earlier to occur of the end of such four month period or the date on which such financing statement would have otherwise lapsed, and (iii) with respect to "investment property," under and as defined in Revised Article 8, in which a security interest has been perfected by the filing of a financing statement in the jurisdiction of the location of the debtor, from the time that the debtor changes its location from that jurisdiction to a new jurisdiction unless such security interest is perfected in the new jurisdiction on or before the time of such change of location. (b) If any debtor changes its name, identity or corporate structure such that any financing statement becomes misleading, such financing statement will be ineffective to perfect a security interest in any collateral acquired by such debtor more than four months after such change. We assume no obligation to update this opinion as a result of any change in any fact, circumstance or statute or other rule of law occurring after the date hereof. This opinion is delivered to you solely in connection with the transactions referred to herein and for your sole use and no other person or entity may rely on this opinion without our express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(3)(a)(ii) [Letterhead of Bingham Dana LLP] [Delivery Date] To Each of the Parties Listed on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, as amended and restated as of ______________ between State Street and ___________________, as Owner Participant ("Owner Participant") (the "Trust Agreement") in connection with the transactions contemplated by that certain Participation Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee (the "Lessee") and the Initial Owner Participant; the Owner Participant; the Owner Trustee; and First Security Bank, National Association, in its individual capacity and as Indenture Trustee (the "Indenture Trustee"), Pass Through Trustee and Subordination Agent. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you in accordance with Section 4.02(d)(iii) of the Participation Agreement. Our representation of State Street has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied entirely upon (i) the representations of the parties set forth in the Operative Agreements and (ii) the certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations and certificates. We have examined each of the Operative Agreements to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"), the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records, documents, certificates and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyer in the firm that signed this opinion, the individual lawyers in the firm who have participated directly in the specific transactions to which this opinion relates or in the preparation of this opinion and the partner of the firm responsible for State Street corporate trust matters, and without any special or additional investigation undertaken for the purposes of this opinion. Each opinion set forth below relating to the enforceability of any agreement or instrument against State Street, the Owner Trustee or the Owner Participant, as applicable, is subject to the following general qualifications: (i) as to any agreement to which State Street or the Owner Trustee, as applicable, is a party, we assume that such agreement is the legal, valid and binding obligation of each other party thereto (except, with respect to the Trust Agreement, the Owner Participant); (ii) except as otherwise set forth in our opinions in paragraphs 14 and 15 below, the enforceability of any obligation of State Street, the Owner Trustee and the Owner Participant, may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, marshaling or other similar laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); (iii) no opinion is given herein as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default or as to the availability of any specific or equitable relief of any kind. However, we are of the opinion that, subject to the other limitations and qualifications contained in this opinion, the remedies provided in the Owner Trustee Documents, taken as a whole, are adequate for the realization of the principal benefits or security of said agreements (except for the economic consequences of procedural or other delay); and (iv) the enforcement of any rights and the availability of any specific or equitable relief of any kind may in all cases be subject to an implied duty of good faith and to general principles of equity (regardless of whether such enforceability or relief is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. Subject to the limitations set forth herein, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed herein are limited solely to the internal substantive laws of the State of Connecticut and the Federal laws of the United States of America. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by the Transportation Code, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Aircraft, Airframe or the Engines. Except as set forth in paragraph 12 below, which opinion is based solely upon our review of Uniform Commercial Code search reports conducted with the Secretary of the State of the State of Connecticut, we have made no examination of, and no opinion is given herein as to the Owner Trustee's or Owner Participant's title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any of the Indenture Estate. Other than as expressed in paragraph 5 below, we express no opinion as to the creation, attachment, perfection or priority of any mortgage, security interest or lien in any of the Indenture Estate. Nor do we express any opinion as to the attachment or perfection of any security interest in any of the Trust Estate excluded from, or in which the attachment or perfection of a security interest is not governed by Article 9 of the Uniform Commercial Code of the State of Connecticut (the "UCC"). In addition, there exist certain limitations, resulting from the operation of Section 9-306 of the UCC, on the perfection of the security interests in proceeds created by the Operative Agreements. Article 9 of the UCC requires the filing of continuation statements within the period of six months prior to the expiration of five years from the date of original filing of UCC financing statements to maintain effectiveness of such financing statements and perfection of security interests. Further, additional financing statements may be required to be filed to maintain the perfection of a security interest if any grantor thereof changes its name or location or the location of collateral, or makes certain other changes, as provided in the UCC. With your permission and without investigation, with respect to paragraphs 2, 3 and 4 below in connection with our opinion relating to the legality, validity and binding effect of the documents there referred to, to the extent that the laws of the State of Connecticut do not govern such documents, we have assumed that the laws of the jurisdictions whose laws govern such documents are not materially different from the internal substantive laws of the State of Connecticut. In rendering our opinion in paragraphs 14 and 15 below, we have assumed that the Owner Participant acquired its interest in the Trust Estate for fair consideration and in good faith without any intention to hinder, defraud or delay the Owner Participant's creditors. This opinion is rendered solely for the benefit of those institutions listed on Schedule A hereto and their respective successors and assigns in connection with the transactions contemplated by the Operative Agreements and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing, we are of the opinion that: 1. State Street is a national banking association duly organized, validly existing and in good standing with the Comptroller of the Currency under the laws of the United States of America, 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 and has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents and to issue, execute, deliver and perform its obligations under the Certificates. 2. The Owner Trustee has the power and authority to accept title to and delivery of the Aircraft, and a representative of the Owner Trustee has been duly authorized to accept title to and delivery of the Aircraft on behalf of the Owner Trustee. 3. State Street has or had, on the date of execution thereof, duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitute the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 4. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. The Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and assuming due authentication thereof by the Indenture Trustee, constitutes the legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms and the terms of the Indenture; and the Certificates are entitled to the benefits and security afforded by the Indenture in accordance with its terms and the terms of the Indenture. 5. Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and that the Owner Participant has the requisite corporate power and authority to enter into and perform its obligations under the Trust Agreement, said Trust Agreement constitutes the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with the terms thereof. 6. To the extent that the UCC is applicable, except for the Indenture Trustee's taking possession of all monies and securities (including instruments) constituting part of the Trust Indenture Estate, no action, including the filing or recording of any document, is necessary (i) to create under the UCC the security interest in the Trust Indenture Estate (including the grant and assignment unto the Indenture Trustee of the security interest in all estate, right, title and interest of the Owner Trustee in, to and under the Lease and the Participation Agreement) which the Indenture by its terms purports to create in favor of the Indenture Trustee, and (ii) to perfect in the State of Connecticut such security interest, except for the filing of a UCC financing statement complying with the formal requisites of Section 9-402 of the UCC in the office of the Division of Corporations and Commercial Code of the State of Connecticut with respect to the security interest, which filing has been duly effected, and the filing of continuation statements with respect thereto required to be filed at periodic intervals under the UCC. 7. The Trust Agreement duly creates a legal and valid trust under Connecticut law; the trust created by the Trust Agreement exists for the benefit of the Owner Participant as provided therein and creates for the benefit of the Owner Participant the interest in the Trust Estate which the Trust Agreement by its terms purports to create, subject however to the provisions of, and the Liens created by, the Indenture and the Lease. 8. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Certificates or the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any Lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order in each case, known to us applicable to or binding on it. 9. To our knowledge, there are no proceedings or actions pending or threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority which, individually or in the aggregate, if adversely determined, would materially and adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents or the Certificates. 10. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 11. There are no fees, taxes or other charges payable by the Owner Trustee, the Trust Estate or the trust created by the Trust Agreement imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by State Street, individually or as Owner Trustee, of the Owner Trust Documents (other than franchise or other taxes based on or measured by any fees or compensation received by State Street, acting as the Owner Trustee, for services rendered in connection with the transactions contemplated by the Operative Agreements) and, assuming that the trust created by the Trust Agreement will not be taxable as a corporation, but, rather, will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, (i) such trust will not be subject to any fees, taxes or other charges imposed by the State of Connecticut or any political subdivision thereof based on income, receipts, value or otherwise, (ii) Holders that are not residents of or otherwise subject to tax in Connecticut will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate and (iii) assuming the Owner Participant is not a Connecticut resident or otherwise subject to tax in Connecticut and further assuming that the assets of the trust created by the Trust Agreement are not deemed to be located in Connecticut, the Owner Participant will not be subject to any taxes imposed by the State of Connecticut or any political subdivision thereof solely as a result of being the beneficial owner of the trust created by the Trust Agreement. 12. The Owner Trustee has received such title to the Aircraft as has been conveyed to it subject to the rights of the Owner Trustee and the Lessee under the Lease and the security interest created pursuant to the Indenture and the Lease; and to our knowledge, there exist no liens or encumbrances affecting the right, title and interest of the Owner Trustee in and to the Trust Estate resulting from claims against State Street not related to the ownership of the Trust Estate or any other transaction contemplated by the Operative Agreements. 13. All the properties which are part of the Indenture Estate (including all right, title and interest of the Owner Trustee pledged and mortgaged by it pursuant to the Indenture) have been pledged and mortgaged with the Indenture Trustee as part of the Indenture Estate, and the beneficial interest of the Owner Participant under the Trust Agreement in and to such properties is subject, to the extent provided in the Indenture, to the liens of the Indenture in favor of the Holders from time to time of the Certificates. 14. Neither a Connecticut court nor a Federal court applying federal law or Connecticut law, if properly presented with the issue and after having properly considered such issue, would permit the Owner Participant to terminate the Trust Agreement, except as otherwise provided therein, until the Lien of the Indenture on the Indenture Estate has been released and until payment in full of the principal of, and premium, if any, and interest on, the Certificates and all other sums due the Holders of the Certificates have been made. 15. Under the laws of the State of Connecticut, as long as the Trust Agreement has not been terminated in accordance with its terms, creditors of any person that is an Owner Participant, holders of a lien against the assets of any such person and representatives of creditors of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively the "Creditors") may acquire legal, valid and enforceable claims and liens, as to the Trust Estate, only against the beneficial interest of such person in the Trust Estate, and do not have, and may not through the enforcement of such Creditors' rights acquire, any other legal, valid, and enforceable claim or lien against the Trust Estate. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(4) [Letterhead of Ray, Quinney & Nebeker] [Certificate Closing Date] To the Persons Listed in Schedule A Attached Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to First Security Bank, National Association, a national banking association ("First Security"), in connection with the Pass Through Trust Agreement dated as of May 1, 1997 (the "Pass Through Trust Agreement"), as supplemented by the Series Supplements dated the date hereof between Federal Express Corporation and First Security, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee, designated as Series Supplement 1998-1-A, 1998-1-B and 1998-1-C, respectively (the "Series Supplements") and the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee, and First Security, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent. Pursuant to the Participation Agreement, one Airbus A300F4-605R aircraft bearing U.S. Registration No. N682FE (the "Aircraft") is being financed. This opinion is furnished pursuant to Section 4.01(j)(v) of the Participation Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Participation Agreement, except that references herein to any instrument shall mean such instrument as in effect on the date hereof. We have examined executed counterparts or copies otherwise identified to our satisfaction of the following documents: (a) The Pass Through Trust Agreement; (b) The Series Supplements; (c) The Pass Through Certificates; (d) The Participation Agreement; (e) The Intercreditor Agreement; and (f) Each Liquidity Facility. (each of the documents identified in paragraphs (a) through (e) are being collectively referred to as the "Pass Through Trustee Documents" and each of the documents identified in paragraphs (d) through (f) are being collectively referred to as the "Subordination Agent Documents"). We have also examined originals or copies of such other documents, such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein and such other instruments 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 have relied upon representations and warranties contained in the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 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: With respect to the opinions set forth in paragraph 8 below, with your permission we have relied upon, and this opinion is limited by, the assumptions set forth in the discussion entitled "Certain Utah Taxes" in the Prospectus Supplement to the Prospectus forming part of Registration Number No. 333-49411 (the "Registration Statement") for the registration of the Pass Through Certificates with the Securities and Exchange Commission. We express no opinion as to the correctness of the foregoing assumptions and we have conducted no independent investigation in this regard. 1. First Security is a national banking association duly organized and validly existing under the laws of the United States of America holding a valid certificate to do business as a national banking association, with banking and trust powers. 2. Each of First Security, the Pass Through Trustee and the Subordination Agent, as the case may be, has or had, on the date of execution thereof, full corporate power, authority and legal right to execute, deliver and perform each of the Pass Through Trustee Documents and the Subordination Agent Documents, as the case may be, and to authenticate the Pass Through Certificates delivered on the Certificate Closing Date. 3. Each of First Security, the Pass Through Trustee and the Subordination Agent has duly authorized, executed and delivered each Pass Through Trustee Document or Subordination Agent Document, as the case may be; each such document constitutes a legal, valid and binding obligation of the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, of First Security) enforceable against the Pass Through Trustee or the Subordination Agent, as the case may be (and, to the extent set forth in the respective Pass Through Trustee Document or Subordination Agent Document, against First Security) in accordance with its terms. 4. The Pass Through Certificates issued and dated the Certificate Closing Date have been duly authorized and validly executed, issued, delivered and authenticated by the Pass Through Trustee pursuant to the Pass Through Trust Agreement and the Series Supplements; and the Pass Through Certificates acquired by the Underwriters under the Underwriting Agreement are enforceable against the Pass Through Trustee and are entitled to the benefits of the related Pass Through Trust Agreement and the related Series Supplements. 5. No order, license, consent, permit, authorization or approval of or exemption by, and no notice to or filing with, or the taking of any other action in respect of, any Utah or Federal governmental authority governing the banking or trust powers of First Security, the Pass Through Trustee or the Subordination Agent, and no filing, recording, publication or registration in any public office is required under Utah or Federal law pertaining to its banking or trust powers for the due execution, delivery or performance by First Security, individually or as Pass Through Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Documents (other than the Pass Through Trust Agreement) or the Subordination Agent Documents, as the case may be, and of the certificate of authentication, as Pass Through Trustee, on the Pass Through Certificates, or for the legality, validity, binding effect or enforceability thereof against First Security, the Pass Through Trustee or the Subordination Agent, as the case may be. 6. The execution, delivery and performance by the Pass Through Trustee or First Security, as the case may be, of each of the Pass Through Documents and the Subordination Agent or First Security, as the case may be, of each of the Subordination Agent Documents, and the issuance, execution, delivery and performance of the Pass Through Certificates by the Pass Through Trustee are not or were not, on the date of execution thereof, in violation of the charter or by-laws of First Security or of any law, governmental rule, or regulation of the State of Utah or the United States of America governing the banking or trust powers of First Security or, to our knowledge, of any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or, to our knowledge, of any judgment or order of the State of Utah or the United States of America relating to the banking or trust powers of First Security. 7. There are no actions, suits, investigations or proceedings pending or, to our knowledge, threatened against or affecting First Security, the Pass Through Trustee or the Subordination Agent or any of its properties in any court or before any administrative agency or arbitrator, which, if adversely determined, would materially adversely affect the ability of First Security, the Pass Through Trustee or the Subordination Agent, as the case may be, to perform its obligations under any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be, and there are no pending or, to our knowledge, threatened actions or proceedings before any court, administrative agency or tribunal involving First Security, the Pass Through Trustee or the Subordination Agent in connection with the transactions contemplated by any of the Pass Through Trustee Documents or the Subordination Agent Documents, as the case may be. 8. Neither the trusts created by the Pass Through Trust Agreement and the Series Supplements nor the Pass Through Trustee, in its individual or trust capacity, as the case may be, nor the Owner Participant, nor the Owner Trustee, nor their respective Affiliates, successors or assigns, will be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof (other than taxes imposed on the fees received by First Security for acting as Pass Through Trustee under the Series Supplements). Certificate holders who are not residents of or otherwise subject to tax in Utah 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), governmental fee or other similar charge under the laws of the State of Utah or any political subdivision thereof as a result of purchasing, owning (including receiving payments with respect to) or selling a Pass Through Certificate. There are no applicable taxes under the laws of the State of Utah or any political subdivision thereof upon or with respect to (a) the construction, mortgaging, financing, refinancing, purchase, acquisition, acceptance, rejection, delivery, nondelivery, transport, location, ownership, insurance, control, assembly, possession, repossession, operation, use, condition, maintenance, repair, sale, return, abandonment, replacement, preparation, installation, storage, redelivery, manufacture, leasing, subleasing, modification, rebuilding, importation, transfer of title, transfer of registration, exportation or other application or disposition of the Aircraft or any interest in any thereof, (b) payments of Rent or other receipts, income or earnings arising therefrom or received with respect to the Aircraft or any interest in any thereof or payable pursuant to the Lease, (c) any amount paid or payable pursuant to any Operative Agreements, (d) the Aircraft or any interest therein or the applicability of the Lease to the Aircraft or any interest in any thereof, (e) any or all of the Operative Agreements, any or all of the Pass Through Certificates or any interest in any or all thereof or the offering, registration, reregistration, issuance, acquisition, modification, assumption, reissuance, refinancing or refunding of any or all thereof, and any other documents contemplated thereby and amendments or supplements hereto and thereto, (f) the payment of the principal of, or interest or premium on, or other amounts payable with respect to, any or all of the Pass Through Certificates, whether as originally issued or pursuant to any refinancing, refunding, assumption, modification or reissuance, or any other obligation evidencing any loan in replacement of the loan evidenced by any or all of the Pass Through Certificates, or (g) otherwise with respect to or in connection with the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements, which would not have been imposed if the Pass Through Trustee had not had its principal place of business in, had not performed (either in its individual capacity or as Pass Through Trustee) any or all of its administrative duties under the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, and had not engaged in any activities unrelated to the transactions contemplated by the Pass Through Trust Agreement, the Series Supplements, the Pass Through Certificates and the Operative Agreements in, the State of Utah. 9. Each of the Certificates to be delivered to and registered in the name of the Subordination Agent on the date hereof pursuant to the Participation Agreement and the Intercreditor Agreement will be held by the Subordination Agent in trust for the Pass Through Trustee under the applicable Pass Through Trust Agreement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are admitted to practice law in the State of Utah and we do not hold ourselves out as being experts on the laws of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Utah and the federal laws of the United States of America governing the banking and trust powers of First Security. In addition, we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended and (iii) state securities or blue sky laws. Insofar as the foregoing opinions relate to the validity and enforceability in the State of Utah of the Certificates and the other Pass Through Trustee Documents expressed to be governed by the laws of the State of New York, we have assumed that the laws of New York are identical to the laws of Utah in all material respects, and that the Certificates and such Pass Through Trustee Documents constitute legal, valid, binding and enforceable documents or instruments under such laws (as to which we express no opinion). No opinion is expressed as to the priority of any security interest or as to title to any part of the Trust Estate. B. The foregoing opinions regarding enforceability of any document or instrument, are subject to (i) applicable bankruptcy, insolvency, moratorium, reorganization, receivership and similar laws affecting the rights and remedies of creditors generally, and (ii) general principles of equity (regardless of whether such enforceability is considered 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 First Security and the Pass Through Trustee, of the Pass Through Trustee Documents to which each is a party and that each of such parties has the full power, authority and legal right to execute and deliver each such document. D. We have assumed that all signatures (other than those of the Pass Through Trustee or First Security) on documents and instruments examined by us are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. F. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment involved in these transactions. G. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment involved in these transactions or the priority of any mortgage or security interest. This opinion is rendered solely for your benefit and may not be relied upon by any other person or entity for any purpose without our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(a) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement (as defined below), and as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, a national banking association, as Subordination Agent under the Intercreditor Agreement, and as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust, and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement"), among KfW, First Security Bank, National Association, a national banking association, as Pass Through Trustee and as Subordination Agent (the Liquidity Agreements and the Intercreditor Agreement are hereinafter collectively referred to as the "Relevant Documents"). Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. 6. The waiver of immunity set forth in Section 7.11(c) of each of the Liquidity Agreements and Section 10.11(c) of the Intercreditor Agreement is valid under German law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(b) [Letterhead of Kreditanstalt fur Wiederaufbau] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: In my capacity as General Counsel of Kreditanstalt fur Wiederaufbau ("KfW") I am rendering this opinion in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. Capitalized terms herein which are undefined have the meanings assigned thereto in the Relevant Documents. For purposes of this legal opinion, I have examined a copy of each of the Relevant Documents and such other certificates, documents, agreements and instruments as I have deemed necessary as a basis for the opinions expressed below. In giving this opinion, I have assumed the genuineness of all signatures, the authenticity of all agreements, certificates, instruments and documents submitted to me as originals, and the conformity to the originals of all agreements, certificates, instruments and documents submitted to me as copies. As to questions of fact material to the opinions expressed below, I have, when relevant facts were not independently established by me, examined and relied upon representations of officers of KfW. Based upon and subject to the foregoing examination and assumptions, and subject to the qualifications set forth below, I am of the opinion that: 1. KfW is duly organized and validly existing as a corporation under the public law of the Federal Republic of Germany and has full power and authority (corporate and otherwise) to execute, deliver and perform the Relevant Documents. 2. Mr. Scheer and Mr. Behler, acting together, are both duly authorized by KfW to execute and deliver the Relevant Documents for and on behalf of KfW. 3. The governing-law clause, subjecting the Relevant Documents to New York law, is valid under German law. (i) Under German law, New York law will be applied to an agreement, such as the Relevant Documents, which under German law has been validly subjected to New York law. (ii) (a) None of the terms of the Relevant Documents is irreconcilable with important principles of German law, and (b) there are no mandatory provisions of German law which must be applied to the transactions covered by the Relevant Documents. 4. No notice to or filing with, any governmental, administrative or other authority or court of the Federal Republic of Germany is required for the execution or delivery of the Relevant Documents by KfW or for the performance by KfW of the Relevant Documents. 5. Assuming the validity under New York law of the Relevant Documents: (i) The Relevant Documents constitute legal, valid and binding obligations of KfW enforceable against KfW in accordance with their respective terms. (ii) A judgment obtained against KfW in the courts of the State of New York in any suit, action or proceeding arising out of the Relevant Documents will be enforceable against KfW in the courts of Germany without further litigation or examination on the merits of such suit, action or proceeding, provided that conditions in terms of Section 328 of the German Zivilprozeordnung (Code of Civil Procedure) - notably (a) if reciprocity is not guaranteed; (b) if according to German law the foreign venue is improper, and if procedural rules have not been observed by the court to the disadvantage of the defendant; (c) if the judgment obtained is irreconcilable with important principles of German law or would conflict with German basic rights (see 3(ii) above) - do not bar the judgment from recognition. (iii) The obligations of KfW under the Relevant Documents rank at least equal in priority of payment and in all other respects with its obligations to pay any other unsecured and unsubordinated obligations of KfW for borrowed money, including deposit liabilities, that are not expressly preferred by law. The foregoing opinions are subject to the following qualifications: (i) The opinion in paragraph (5) with respect to enforceability is subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws affecting creditors' rights generally, applicable to KfW and to any law or general principle of law from time to time in effect in the Federal Republic of Germany that could be considered by the German Courts as a provision of public policy. (ii) No opinion is expressed with respect to the law of any jurisdiction other than the laws of the Federal Republic of Germany. This opinion is being furnished to you solely for your benefit in connection with the transactions described above and may not be used, circulated, quoted or otherwise referred to for any other purpose without my express written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. EXHIBIT A(5)(c) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with the transactions contemplated by (i) the Irrevocable Revolving Credit Agreement Class A Pass Through Certificates, dated as of June 15, 1998 (the "Class A Liquidity Agreement"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-A Pass Through Trust, (ii) the Irrevocable Revolving Credit Agreement Class B Pass Through Certificates, dated as of June 15, 1998 (the "Class B Liquidity Agreement" and, together with the Class A Liquidity Agreement, the "Liquidity Agreements"), between KfW and First Security Bank, National Association, as Subordination Agent under the Intercreditor Agreement, as defined below, as agent and trustee for the Federal Express Corporation 1998-1-B Pass Through Trust and (iii) the Intercreditor Agreement, dated as of June 15, 1998 (the "Intercreditor Agreement" and, together with the Liquidity Agreements, the "Relevant Documents"), among KfW and First Security Bank, National Association, as Pass Through Trustee and as Subordination Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Relevant Documents. In rendering the opinion expressed below, we have examined the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary. In our examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Relevant Documents. In rendering the opinion expressed below, we have assumed, with respect to each Relevant Document, that: (i) it has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitutes legal, valid, binding and enforceable obligations of all of the parties thereto; (ii) all signatories thereto have been duly authorized; and (iii) all of the parties thereto are duly organized and validly existing and have the power and authority (corporate, partnership, trust or otherwise) to execute, deliver and perform thereunder. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinion expressed below, we are of the opinion that each Relevant Document constitutes the legal, valid and binding obligation of KfW, enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of provisions in the Relevant Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (B) We express no opinion as to (i) the effect of the laws of any jurisdiction in which KfW is located (other than New York) that limit the interest, fees or other charges KfW may impose for the loan or use of money or other credit, (ii) Section 7.11(a)(i) of each Liquidity Agreement and Section 10.11(a)(i) of the Intercreditor Agreement, insofar as such Sections relate to the subject matter jurisdiction of a Federal court sitting in New York, New York to adjudicate any controversy related to the Relevant Documents, (iii) the waiver of inconvenient forum set forth in Section 7.11(a)(ii) of each Liquidity Agreement and Section 10.11(a)(ii) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York and (iv) the waiver of immunity set forth in Section 7.11(c) of each Liquidity Agreement and Section 10.11(c) of the Intercreditor Agreement with respect to proceedings in a Federal court sitting in New York, New York and a State court of the State of New York. The foregoing opinion is limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. At the request of KfW, this opinion letter is provided to you by us in our capacity as special New York counsel to KfW, and this opinion letter may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(5)(d) [Letterhead of Milbank, Tweed, Hadley & McCloy] [Certificate Closing Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation 1998-1 Pass Through Trusts ------------------------------------------------------ Ladies and Gentlemen: We have acted as special New York counsel to Kreditanstalt fur Wiederaufbau (herein called "KfW") in connection with (i) Letter of Credit No. ______________ dated July ___, 1998 (the "Letter of Credit") issued by KfW in favor of First Security Bank, National Association, as Subordination Agent (the "Subordination Agent") under the Intercreditor Agreement dated as of June 15, 1998 among First Security Bank, National Association, as Pass Through Trustee, KfW, as Class A Liquidity Provider and Class B Liquidity Provider, and the Subordination Agent, (ii) the Reimbursement Agreement dated July ___, 1998 (the "Reimbursement Agreement") between KfW and Federal Express Corporation, and (iii) the letter dated July ___, 1998 (the "Letter Agreement" and, together with the Letter of Credit and the Reimbursement Agreement, the "Relevant Documents") from KfW to the Subordination Agent. In rendering the opinions expressed below, we have examined each of the Relevant Documents, the opinion dated the date hereof of Ruediger Sass, General Counsel of KfW, and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon certificates of appropriate representatives of KfW. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinion below as to KfW) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate, trust or otherwise) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that each of the Relevant Documents constitutes valid and binding obligations of KfW enforceable against KfW in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium or other similar laws relating to or affecting the rights of creditors generally (as such laws would apply in the event of the insolvency, liquidation, reorganization, conservatorship or receivership of, or other similar occurrence with respect to, KfW) and except as the enforceability of such Relevant Document is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinion is subject to the following comments and qualifications: (A) The enforceability of any provision in any of the Relevant Documents to the effect that the terms thereof may not be waived or modified except in writing may be limited as provided in Section 15-301(1) of the New York General Obligations Law and Section 1-205(3) of the New York Uniform Commercial Code. (B) With respect to our opinion above as it pertains to the Letter of Credit, we call your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D. Ariz. 1991), which holds that a bankruptcy court may enjoin payment under a letter of credit pursuant to Section 105 of the United States Bankruptcy Code, 11 U.S.C. Section 105, in unusual circumstances. Id. at 147. In that case, the unusual circumstance was a bankruptcy court finding that the injunction was necessary for the reorganization. Id. at 148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr. E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could conceivably be appropriate" if certain factors relating to issuing Section 105(a) injunctions "generally weighed in the debtor's favor." Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987). To the extent that the rationale of Wysko Investment Co. or Delaware River Stevedores would support the issuance of a permanent injunction against payment under the Letter of Credit, we are of the opinion that those cases do not reflect a correct statement of the law in respect of letters of credit and are not controlling precedent in any court exercising bankruptcy jurisdiction outside of Arizona or the Eastern District of Pennsylvania, as the case may be. (C) We express no opinion as to whether a court exercising bankruptcy jurisdiction might issue a temporary restraining order or other interim relief in order to preserve the status quo concerning the Letter of Credit pending a review of the merits of any request to enjoin payment under the Letter of Credit. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction. In particular, we do not express any opinion as to the laws of Germany and, to the extent such laws may be relevant to the opinion expressed herein, we have, with your permission, relied upon the aforementioned opinion of Ruediger Sass, Esq., General Counsel of KfW, without independently considering the matters covered thereby, and our opinion is subject to all limitations, exceptions and qualifications contained therein as if set forth herein in full. This opinion letter is provided to you by us in our capacity as special New York counsel to KfW and may not be relied upon by any other person or entity or by you for any purpose other than in connection with the Relevant Documents without, in each instance, our prior written consent. Very truly yours, SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau EXHIBIT A(6) [Letterhead of General Electric Company] [Delivery Date] To Each of the Parties named on Schedule A Hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Reference is made to (i) that certain Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Participation Agreement") by and among Federal Express Corporation, as Lessee and Initial Owner Participant ("Fed Ex"), ________________________, as Owner Participant, State Street Bank and Trust Company of Connecticut, National Association ("SSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Owner Trustee), First Security Bank, National Association ("FSB") (not in its individual capacity, except as otherwise expressly set forth therein, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent); (ii) that certain Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Purchase Agreement Assignment") between Fed Ex, as Lessee and SSB, as Lessor; (iii) that certain Lease Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of _______________ (the "Lease") between SSB (not in its individual capacity, but solely as Owner Trustee), as Lessor and Fed Ex, as Lessee; (iv) that certain Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Indenture") between SSB (not in its individual capacity), as Owner Trustee and FSB (not in its individual capacity), as Indenture Trustee; and (v) that certain Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of ______________ (the "Trust Agreement") between SSB (not in its individual capacity), as Owner Trustee and ________________________, as Trustor. I am an attorney employed by General Electric Company, a New York corporation (the "Engine Manufacturer"), and as such have acted as counsel for the Engine Manufacturer in connection with the execution and delivery by the Engine Manufacturer of the Consent (the "Consent"), and the Engine Warranty Assignment (Federal Express Corporation Trust No. N682FE) (the "Engine Warranty Assignment"). The Consent and the Engine Warranty Assignment covers two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. In this connection, I have, or an attorney under my supervision has, reviewed such documents as I have deemed necessary for the purpose of this opinion, including, but without limiting the generality of the foregoing, the General Terms Agreement No. 6-9034, dated as of July 3, 1991 between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), the Engine Product Support Plan forming a part thereof (the "Engine Product Support Plan"), the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. In making such examinations, I have relied upon the accuracy of original, certified, conformed, photocopied or telecopied copies of such records, agreements, certificates and other documents as I have deemed necessary or appropriate to enable me to render the opinions expressed herein. In all such examinations, I have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to me as certified, conformed, photocopied or telecopied copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. As to various questions of fact material to such opinions, I have relied, when such relevant facts were not independently established by me, solely upon the accuracy of the statements, representations and warranties made in the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture and the Trust Agreement. With your consent, and for the purposes of this opinion, I have assumed (other than with respect to the Engine Manufacturer), the accuracy of the following matters, but I have not made any independent investigation or inquiry with respect thereto and I render no opinion on such matters: (a) each of the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have been duly and validly authorized, executed and delivered by all parties thereto and constitutes the legal, valid and binding obligations of each of such parties in accordance with the respective terms thereof; and (b) the respective parties to the Participation Agreement, the Purchase Agreement Assignment, the Lease, the Trust Indenture, and the Trust Agreement have obtained, and there are in full force and effect, any and all federal, state, local or foreign governmental agencies and authorities in connection with the transactions contemplated thereby, to the extent necessary for the legality, validity and binding effect or enforceability of the Consent and the Engine Warranty Assignment. Based upon the foregoing, and subject to the specific assumptions, qualifications and reliances herein set forth, and on the basis of my consideration of such facts and law as I have deemed necessary for purposes of this letter, it is my opinion that: (1) The Engine Manufacturer has the full corporate power, authority and the legal right to enter into and perform its obligations under the General Terms Agreement, the Consent and the Engine Warranty Assignment. The execution, delivery and performance by the Engine Manufacturer of each of the General Terms Agreement, the Consent and the Engine Warranty Assignment was duly authorized by all necessary corporate action on the part of the Engine Manufacturer. (2) Each of the General Terms Agreement, the Consent and Engine Warranty Assignment has been duly authorized, executed and delivered by and constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the respective terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. (3) The Engine Product Support Plan insofar as it relates to the Engine Warranties (as such term is defined in the Engine Warranty Assignment), constitutes a legal, valid and binding obligation of the Engine Manufacturer, enforceable against the Engine Manufacturer in accordance with the terms thereof, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equity principles. The foregoing opinions are limited to the laws of the State of Washington and the federal laws of the United States of America, but no opinion is expressed as to matters governed by the Transportation Code (Title 49 of the United States Code), as amended, or by any other law, statute, rule or regulation of the United States relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of aircraft. Further, no opinion is expressed as to title to any engines or other property. This opinion is furnished by me at your request for your sole benefit and no other person or entity shall be entitled to rely on this opinion without our express written consent. My opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(7) [Letterhead of Clifford Chance] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: We are special French counsel for Airbus Industrie G.I.E. ("Airbus") and AVSA S.A.R.L. ("AVSA") and you have asked for our opinion in connection with certain transactions contemplated in the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee and Initial Owner Participant ("Federal Express"), ______________, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), and First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee, Pass Through Trustee and Subordination Agent, and relating to the Aircraft to be operated by Federal Express. This opinion is being delivered pursuant to Section 4.02(d)(vi) of the Participation Agreement. Capitalized terms used in this opinion and not otherwise defined shall have the meaning assigned thereto in the Participation Agreement. We have examined: (i) a copy of an Airbus A300-600R Freighter Purchase Agreement dated as of July 3, 1991 and made between AVSA and Federal Express with an executed Consent and Guaranty of Airbus of same date attached thereto, sent to us by facsimile by AINA Holdings Inc. ("AINA") on April 27, 1994; (ii) a copy sent to us by facsimile by Davis Polk & Wardwell on ________________ of an executed Purchase Agreement Assignment dated as of ____________ (the "Purchase Agreement Assignment") made between Federal Express and the Owner Trustee; (iii) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie Consent and Agreement to the Purchase Agreement Assignment; (iv) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated AVSA Consent and Agreement to the Purchase Agreement Assignment; (v) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Warranty Bill of Sale, relating to the Aircraft and transferring title therein from AVSA to the Owner Trustee ("AVSA Warranty Bill of Sale"); (vi) a copy sent to us by facsimile by AVSA on _________________ of an executed but undated Airbus Industrie G.I.E. Warranty, in favour of the Participants (the "Airbus Warranty") warranting AVSA's Warranty Bill of Sale; (vii) a copy sent to us by facsimile by AVSA on _________________ of an undated FAA Bill of Sale executed by AVSA in favour of the Owner Trustee; (viii) a copy sent to us by facsimile by AVSA on ___________ of an executed power of attorney dated ________________ appointing Messrs. John Leahy and Michel Dechelotte, acting singly, as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (ix) a copy sent to us by facsimile by AVSA on ______________ of an executed power of attorney dated _______________ appointing Messrs X. de Rouville and J.C Mauries as attorneys-in-fact of Mr. Jean Pierson, Managing Director ("Administrateur Gerant") of Airbus; (x) a copy sent to us by facsimile by AVSA on _____________ of an executed power of attorney dated _______________ appointing Mr. Olivier Lion, acting singly, as attorney-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA; and (xi) a copy sent to us by courier by AVSA on ______________ of an executed power of attorney dated ______________ appointing Ms. Michele Lascaux, Messrs Jacques Debeaulieu, Sylvain Lebeuf, Oliver Lion, Philippe Martin, Laurent Boisson, Klaus Zimmer, Andreas Rost, Pierre Viobil, Paul Cottam, Bruno Schiltz and Alain Rochet, acting singly, as attorneys-in-fact of Mr. Christophe Mourey, Chief Executive Officer ("Gerant") of AVSA. The documents referred to in paragraphs (i) to (xi) above shall be referred to herein below as the "Documents. Based on the foregoing, and such other documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, and assuming the Documents to have been duly executed by the parties thereto (other than Airbus and AVSA), the genuineness of all signatures and the completeness and conformity to the originals of all documents supplied to us as copies or as facsimiles, we are of the opinion that, subject to the qualifications set out below: 1. Airbus is a groupement d'interet economique duly organized and existing under the laws of the French Republic, and has the power and authority to carry on its business as now conducted. The present members of Airbus are (i) Aerospatiale, Societe Nationale Industrielle, (ii) Daimler-Benz Aerospace Airbus GmbH, (iii) British Aerospace (Operations) Ltd. and (iv) Construcciones Aeronauticas S.A., and each of such corporations is, without the need to proceed against any collateral security for the indebtedness of Airbus or to take any other legal action or process (except for service on Airbus by huissier of notice to perform and subsequent failure by Airbus to do so), jointly and severally liable with the other members for the debts of Airbus arising out of obligations contracted by Airbus while such corporation is a member of Airbus. 2. AVSA is a societe a responsabilite limitee duly established and existing under the laws of the French Republic and has the power and authority to carry on its business as now conducted. 3. Each of Airbus and AVSA has full power and authority to enter into and to execute, deliver and perform its obligations under those of the Documents to which it is a party; such obligations are legal, valid and binding upon them respectively, are enforceable in accordance with their respective terms and rank pari passu with the other unsecured obligations of Airbus or AVSA, as the case may be. 4. All actions, authorizations, approvals, consents, conditions and things required at law to be taken, fulfilled and done to authorize the execution, delivery and performance by Airbus and AVSA of those of the Documents to which they respectively are party have been taken, obtained, fulfilled and done; and no consents under any exchange control, laws, rules or regulations of the French Republic are necessary in connection therewith. 5. Neither the execution and delivery and performance of the Documents to which Airbus and AVSA respectively are a party, nor the consummation of the transactions contemplated thereby, contravenes or violates any law, governmental rule or regulation applicable to or binding on Airbus or AVSA. 6. The choice of the laws of the State of New York to govern the Documents (which are expressed to be so governed) is valid under the laws of the French Republic, and a French court would uphold such choice of law in any suit on the Documents brought in a French court. 7. Under the laws of the French Republic, Airbus and AVSA are subject to private commercial law and to suit, and neither Airbus nor AVSA, nor their respective properties have any immunity from the jurisdiction of any court or any legal process (whether through service of notice, attachment prior to notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), except that: (a) to the extent that Airbus or AVSA occupies or possesses any property by virtue of any license or grant from the French State, such property and the title of Airbus or AVSA thereto may be immune from suit or execution on the grounds of sovereignty, and (b) suit and execution against Airbus and AVSA or their respective property may be affected by action taken by the French public authorities in the interests of national defence or on the occurrence of exceptional circumstances of paramount importance to the national interest of France, as such concept is understood under the Constitution, laws and regulations of France. 8. No French value added tax is due upon the transfer of title of the Aircraft from AVSA to State Street Bank and Trust Company of Connecticut, National Association as Owner Trustee. 9. In connection with the obligations of Airbus and AVSA under the Documents, this opinion must be read subject to the following qualifications and observations as to French law: (a) the remedy of specific performance may not be available in a French court; (b) the enforcement against Airbus of any of the Documents to which it is a party may be limited by applicable bankruptcy, insolvency, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, as such laws are applied to Airbus. The enforcement against AVSA of any of the Documents to which it is a party may be limited by such laws, as such laws are applied to AVSA. The enforcement against any member of Airbus of any obligation of Airbus contained in the Documents may be limited by such laws, as such laws are applied to such member; (c) in respect of payment obligations, a French court has power under Article 1244-1 of the French Civil Code to grant time to a debtor (not in excess of two years), taking into account the position of the debtor and the needs of the creditor; (d) in order to ensure the validity as against third parties of the assignment made in the Purchase Agreement Assignment, it is necessary that notice of such assignment be served on Airbus and AVSA by "huissier" in accordance with the provisions of Article 1690 of the French Civil Code; (e) in the event of any proceedings being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court would probably give judgment expressed as an order to pay, not such currency, but its French Franc equivalent at the time of payment or enforcement of judgment. With respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceedings, French law may require that all claims or debts be converted into French Francs at an exchange rate determined by the court at a date related thereto, such as the date of commencement of a winding-up; (f) a determination or certificate as to any matter provided for in the Documents might be held by a French court not to be final, conclusive or binding, if such determination or certificate could be shown to have an unreasonable, incorrect or arbitrary basis or not to have been given or made in good faith; (g) claims may become barred by effluxion of time or may be or become subject to defence of set-off or counterclaim; (h) provisions in any Document providing that it or any other Documents may be amended or varied or any provision thereof waived only by an instrument in writing may not be effective; (i) a French court may stay proceedings if concurrent proceedings are being brought elsewhere; (j) we express no opinion as to whether any provision in the Documents conferring a right of set-off or similar right would be effective against a liquidator or a creditor; (k) our opinion as to the enforceability of the Documents relates only to their enforceability in France in circumstances where the competent French court has and accepts jurisdiction. The term "enforceability" refers to the legal character of the obligations assumed by the parties under the documents, i.e., that they are of a character which French law enforces or recognizes. It does not mean that the Documents will be enforced in all circumstances or in foreign jurisdictions or by or against third parties or that any particular remedy will be available; and (l) Article 899 of the French Tax Code provides that agreements evidencing an undertaking to pay a sum of money are subject to stamp tax ("droit de timbre") of a nominal amount if made in the French Republic, if made in a foreign country, such agreements are subject to a stamp tax of a nominal amount before certain use thereof can be made in the French Republic (Article 897 of the French Tax Code). However non-payment of such stamp tax does not affect the legality, validity or enforceability of the agreements. In rendering the foregoing opinions, we have assumed that the Documents (expressed to be governed by New York law) constitute the legal, valid and binding obligations of the parties under New York law. We are qualified as French Avocats. No opinion is expressed herein as to laws other than the laws of the French Republic as of the date hereof. This opinion is for your use and that of no one else, and is limited to (i) the matters specifically mentioned herein, and (ii) the purpose set out above. Very truly yours, SCHEDULE A Lessee - ------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT A(8) [Letterhead of Daugherty, Fowler & Peregrin] [Delivery Date] To the Parties Named on Schedule A attached hereto Re: Federal Express Corporation Trust No. N682FE -------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.02(d)(vii) of the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, as amended and restated as of _____________ (the "Participation Agreement") among Federal Express Corporation, as Lessee (the "Lessee") and Initial Owner Participant, _________________, as Owner Participant (the "Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee ("Indenture Trustee"), Pass Through Trustee and Subordination Agent, with respect to that portion of Subtitle VII of Title 49 of the United States Code relative to the recordation of instruments and the registration of aircraft thereunder. The capitalized terms herein shall, unless otherwise defined, have the same meanings given them in the Participation Agreement or in Annex I attached hereto. We have examined and filed on this date with the Federal Aviation Administration (the "FAA") the following described instruments at the respective times listed below: (a) AC Form 8050-2 Aircraft Bill of Sale dated _____________ (the "FAA Bill of Sale") from AVSA S.A.R.L., as seller, conveying title to the Airframe to the Owner Trustee, which FAA Bill of Sale was filed at ____ _.m., C._.T.; (b) AC Form 8050-1 Aircraft Registration Application dated _____________ (the "Aircraft Registration Application") by the Owner Trustee, as applicant, covering the Airframe, which Aircraft Registration Application was filed at ____ _.m., C._.T.; (c) Affidavit of the Owner Trustee dated _____________ (the "Owner Trustee Affidavit") pursuant to Section 47.7(c)(2)(ii) of Part 47 of the Federal Aviation Regulations together with Affidavit of the Owner Participant dated _____________ (the "Owner Participant Affidavit") attached thereto, which Owner Trustee Affidavit with the Owner Participant Affidavit attached was filed at ____ _.m., C._.T.; (d) executed counterpart of Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, as amended and restated as of ____________ (the "Trust Agreement") between the Owner Participant and the Owner Trustee, which Trust Agreement was filed at ____ _.m., C._.T.; (e) executed counterpart of Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, as amended and restated as of _____________ (the "Trust Indenture") between the Owner Trustee and the Indenture Trustee, with executed counterpart of Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N682FE) dated _____________ (the "Trust Indenture Supplement") by the Owner Trustee, covering the Aircraft, attached thereto, which Trust Indenture with the Trust Indenture Supplement attached was filed at ____ _.m., C._.T.; and, (f) executed counterpart of Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, as amended and restated as of ______________ (the "Lease") between the Owner Trustee, as lessor, and the Lessee, with executed counterparts of the following attached thereto: (i) Lease Supplement No. 1 (Federal Express Corporation Trust No. N682FE) dated _____________ (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, covering the Aircraft; (ii) the Trust Indenture; and (iii) the Trust Indenture Supplement, which Lease with the foregoing attachments (collectively, the "Lease Attachments") attached was filed at ____ _.m., C._.T. The Confidential Omissions were intentionally omitted from the FAA filing counterparts of the Lease and the Trust Indenture as containing confidential financial information. Based upon our examination of the above described instruments and of such records of the FAA as we deemed necessary to render this opinion, it is our opinion that: 1. the FAA Bill of Sale, the Trust Indenture with the Trust Indenture Supplement attached and the Lease with the Lease Attachments attached are in due form for recordation by and have been duly filed for recordation with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44107; 2. the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement are in due form for filing and have been duly filed with the FAA pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a) and Section 47.7(c) of the Federal Aviation Regulations; 3. the Airframe is eligible for registration under 49 U.S.C. Section 44102 in the name of the Owner Trustee and the filing with the FAA of the FAA Bill of Sale, the Aircraft Registration Application, the Owner Trustee Affidavit with the Owner Participant Affidavit attached and the Trust Agreement will cause the FAA to register the Airframe, in due course, in the name of the Owner Trustee and to issue to the Owner Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the Airframe, and the Airframe will be duly registered pursuant to and in accordance with the provisions of 49 U.S.C. Section 44103(a); 4. the Owner Trustee has valid legal title to the Airframe and the Aircraft is free and clear of all Liens, except (i) the security interest created by the Trust Indenture, as supplemented by the Trust Indenture Supplement, and (ii) the rights of the parties under the Lease, as supplemented by the Lease Supplement; 5. the rights of the Owner Trustee and the Lessee under the Lease, as supplemented by the Lease Supplement, with respect to the Aircraft, are perfected; 6. the Trust Indenture, as supplemented by the Trust Indenture Supplement, constitutes a duly perfected first priority security interest in the Aircraft and a duly perfected first assignment of all the right, title and interest of the Owner Trustee in, to and under the Lease and the Lease Supplement (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), and no other registration of the Airframe or filings other than filings with the FAA (which have been duly effected) are necessary in order to perfect in any applicable jurisdiction in the United States (A) the Owner Trustee's title to the Airframe or (B) such security interest and assignment (insofar as such assignment affects an interest covered by the recording system established by the FAA pursuant to 49 U.S.C. Section 44107), it being understood that no opinion is herein expressed as to the validity, priority or enforceability of such security interest and assignment under local law or as to the recognition of the perfection of such security interest and assignment as against third parties in any legal proceeding outside the United States; 7. no authorization, approval, consent, license or order of, or registration with, or the giving of notice to, the FAA is required for the valid authorization, delivery and performance of the Lease, as supplemented by the Lease Supplement, the Trust Indenture, as supplemented by the Trust Indenture Supplement, or the Trust Agreement except for such filings as are referred to above; and, 8. neither the execution and delivery by the Owner Participant of the Participation Agreement or the Trust Agreement, nor other consummation of the transactions contemplated thereby by the Owner Participant, requires the consent or approval of, or the giving of notice to, or the registration of, or the taking of any other action in respect of the FAA, except (x) the registration of the Airframe, including the submission of the Aircraft Registration Application, the Owner Trustee Affidavit, the Owner Participant Affidavit and the Trust Agreement to the FAA and (y) the filings for recordation specified elsewhere in this opinion. No opinion is expressed as to the Airframe during any period or periods of time during which it has not been subject to United States registration. No opinion is expressed as to laws other than Federal laws of the United States. In rendering this opinion, we were subject to the accuracy of the FAA, its employees and agents, in the filing, indexing and recording of instruments filed with the FAA and in the search for encumbrance cross-reference index cards for the Engines. Further, in rendering this opinion we are assuming the validity and enforceability of the above described instruments under local law. Since our examination was limited to records maintained by the FAA, our opinion does not cover liens which are perfected without the filing of notice thereof with the FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29 of the United States Code, possessory artisan's liens, or matters of which the parties have actual notice. In rendering this opinion we are assuming that there are no documents with respect to the Aircraft which have been filed for recording under the recording system of the FAA but have not yet been listed in the available records of such system as having been so filed. In rendering this opinion we have relied upon the opinion of the Assistant Chief Counsel of the Aeronautical Center dated _____________, a copy of which is attached hereto. Very truly yours, Annex I Certain Definitions ------------------- Airframe, Engines and Aircraft ------------------------------ One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 800 and U.S. Registration No. N682FE (the "Airframe") and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers ___-___ and ___-___ (the "Engines") (the Airframe and the Engines are referred to collectively as the "Aircraft"). Confidential Omissions ---------------------- The Lease was filed with the FAA, with (i) the Basic Rent (Schedule II), (ii) the Stipulated Loss Values (Schedule III), (iii) the Termination Values (Schedule IV) and (iv) the Purchase Option Schedule (Schedule V) omitted from the FAA filing counterpart thereof as containing confidential financial information; and (v) the purchase price under Section 4.02(a)(F) of the Lease set forth in Ancillary Agreement __, which was not attached to the FAA filing counterpart of the Lease or otherwise filed with the FAA for recordation. SCHEDULE A Lessee and Initial Owner Participant - ------------------------------------ Federal Express Corporation Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Indenture Trustee, Pass Through Trustee & Subordination Agent - ------------------------------------------------------------- First Security Bank, National Association Underwriters - ------------ Morgan Stanley & Co. Incorporated Chase Securities Inc. Citicorp Securities, Inc. Credit Suisse First Boston Corporation J.P. Morgan Securities Inc. Liquidity Provider - ------------------ Kreditanstalt fur Wiederaufbau Owner Participant - ----------------- [name of owner participant] EXHIBIT B [Form of Lease Agreement - See Exhibit 4.e to this Form 8K] EXHIBIT C [Form of Indenture - See Exhibit 4.b.1 to this Form 8K EXHIBIT D [Form of Trust Agreement - See Exhibit 4.d to this Form 8K] EXHIBIT E PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) PURCHASE AGREEMENT ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE), dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Assignor" or "Lessee"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee ("SSB" or the "Lessor") under the Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (as amended, modified or supplemented from time to time, the "Trust Agreement"), between Federal Express Corporation (the "Initial Owner Participant") and SSB. W I T N E S S E T H : WHEREAS, the Assignor and AVSA (as hereinafter defined) are parties to the Purchase Agreement (as hereinafter defined), providing, among other things, for the delivery by AVSA to the Assignor of certain aircraft, including the Aircraft (as hereinafter defined) covered by the Participation Agreement (as hereinafter defined); and WHEREAS, pursuant to the Consent and Guaranty (as hereinafter defined), the Guarantor (as hereinafter defined) has agreed, among other things, to unconditionally guarantee the due and punctual performance by AVSA of all of its liabilities and obligations as set forth in the Purchase Agreement; and WHEREAS, pursuant to the Lease (as hereinafter defined), the Lessor will lease the Aircraft to the Assignor; and WHEREAS, on the terms and conditions hereof and of the Consents and Agreements (as hereinafter defined), (a) the Assignor desires to assign to the Lessor (i) the Assignor's right under the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement) to purchase the Aircraft and (ii) certain of the Assignor's remaining rights, title and interests in, to and under the Purchase Agreement and the Consent and Guaranty (insofar as they relate to the Purchase Agreement and the Aircraft) and (b) the Lessor desires to accept the assignments and, except as otherwise provided herein, to assume the obligations of the "Buyer" under the Purchase Agreement, to the extent assigned to it pursuant hereto; and WHEREAS, pursuant to the Indenture (as hereinafter defined), the Lessor will assign, inter alia, its rights hereunder to the Indenture Trustee (as hereinafter defined) to the extent set forth therein; and WHEREAS, such assignments and acceptances are intended to permit consummation of the transactions contemplated by the Participation Agreement; and WHEREAS, AVSA and the Guarantor are willing to execute and deliver their respective Consents and Agreements; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. For all purposes of this Assignment, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the following meanings: "Aircraft" shall mean the Airbus A300F4-605R Freighter aircraft, bearing manufacturer's serial number 800, delivered under the Purchase Agreement, including the two General Electric Model CF6-80C2A5 (Fadec equipped) engines installed on such aircraft on the date of delivery thereof pursuant to the Purchase Agreement. "AVSA" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, and its successors and assigns. "AVSA Consent and Agreement" shall mean the Consent and Agreement of AVSA attached hereto, as amended, modified or supplemented from time to time. "Bill of Sale" shall mean the bill of sale for the Aircraft to be delivered by AVSA. "Certificates" shall have the meaning ascribed thereto in the Participation Agreement. "Consent and Guaranty" shall mean the Consent and Guaranty of the Guarantor attached to the Purchase Agreement, together with all amendments, waivers, and consents heretofore entered into or heretofore granted thereunder and delivered to the Lessor. "Consents and Agreements" shall mean the AVSA Consent and Agreement and the Guarantor Consent and Agreement. "Delivery Date" shall have the meaning ascribed thereto in the Purchase Agreement with respect to the Aircraft. "Guarantor" shall mean Airbus Industrie G.I.E., a French groupement d'interet economique, and its successors and assigns. "Guarantor Consent and Agreement" shall mean the Consent and Agreement of the Guarantor attached hereto, as amended, modified or supplemented from time to time. "Indenture" shall mean the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as amended, modified or supplemented from time to time. "Indenture Trustee" shall mean First Security Bank, National Association, not in its individual capacity but solely as Indenture Trustee under the Indenture and each other person which may from time to time be acting as successor trustee under the Indenture. "Lease" shall mean the Lease Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Assignor, as amended, modified or supplemented from time to time. "Participation Agreement" shall mean the Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, among the Assignor, the Initial Owner Participant, the Pass Through Trustee (as defined therein), the Lessor, the Indenture Trustee and the Subordination Agent (as defined therein), as amended, modified or supplemented from time to time. "Purchase Agreement" shall mean the Airbus A300-600F Purchase Agreement, dated as of July 3, 1991, between the Assignor and AVSA, together with all exhibits, appendices and letter agreements thereto and all amendments, waivers and consents granted thereunder. All other terms used herein in capitalized form that are defined in the Lease shall, when used herein, have the meanings specified in the Lease. 2. Assignment. (a) Generally. The Assignor has sold, assigned, transferred and set over and does hereby sell, assign, transfer and set over unto the Lessor (i) the right upon valid tender of the Aircraft by AVSA in accordance with the Purchase Agreement to purchase the Aircraft pursuant to the Purchase Agreement for the amount specified in the invoice in respect thereof to be delivered by AVSA on the Delivery Date therefor (including, without limitation, the right to accept delivery of the Aircraft through an appointed representative which may be an employee of the Assignor) and the right to be named the "Buyer" in the Bill of Sale and the right to enforce the same under the Consent and Guaranty, (ii) the right to take and hold the Aircraft and (iii) all of the Assignor's other right, title and interest in and to the Purchase Agreement and the Consent and Guaranty (insofar as it relates to the Purchase Agreement), as and to the extent that the same relates to the Aircraft and, except to the extent reserved below, the operation of the Aircraft, including, without limitation, in such assignment to the Lessor (A) all claims for damages in respect of such Aircraft arising as a result of any default by AVSA under the Purchase Agreement, or by any vendor or other supplier of aircraft engines or other parts or equipment installed on or in the Aircraft, including, without limitation, all warranty, service life policy and indemnity provisions in the Purchase Agreement in respect of the Aircraft and all claims thereunder and under the Consent and Guaranty and (B) any and all rights of the Assignor to compel performance of the terms of the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, including all warranty and indemnification provisions in the Purchase Agreement and the Consent and Guaranty and claims thereunder with respect to the Aircraft; reserving to the Assignor, however, (1) all the Assignor's rights and interests in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the Purchase Agreement and the Consent and Guaranty relate to aircraft other than the Aircraft and the purchase and operation of such aircraft and to the extent that the Purchase Agreement and the Consent and Guaranty relate to any other matters not directly pertaining to the Aircraft, (2) all the Assignor's rights and interests in or arising out of any payments, advance payments or deposits made by the Assignor in respect of the Aircraft under the Purchase Agreement or amounts credited or to be credited or paid or to be paid by the Guarantor or AVSA to the Assignor in respect of the Aircraft or otherwise (except amounts credited with respect to warranty claims to the extent set forth in Section 2(b) hereof) as of the date of purchase, (3) the rights to demand, accept and retain all rights in and to all property (other than the Aircraft), data and service, other than data and service provided under Clauses 12 and 13 of the Purchase Agreement, that AVSA and the Guarantor are obligated to provide or do provide pursuant to the Purchase Agreement and the Consent and Guaranty, respectively, with respect to the Aircraft, (4) all of the Assignor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty as and to the extent that the same relates to specification changes, performance and operation pertaining to the Aircraft, other than sub-Clause 2.1 and Clauses 12 and 13 of the Purchase Agreement and under the Consent and Guaranty to the extent relating thereto, (5) the right to obtain services, training, data and demonstration and test flights pursuant to the Purchase Agreement, (6) the right to maintain plant representatives at the Guarantor's plant pursuant to the Purchase Agreement, and (7) all rights set forth in any exhibits, appendices and letter agreements, as at any time amended, modified or supplemented, to the Purchase Agreement, and under the Consent and Guaranty to the extent relating thereto; provided, however, that the reservation set forth in this Section 2(a)(7) shall not in any way limit the rights of the Lessor arising under Sub-clause 2.1 and Clauses 12 and 13 of the Purchase Agreement. (b) Assignment of Rights. If and so long as there shall not exist and be continuing an Event of Default, the Lessor hereby authorizes the Lessee, to the exclusion of the Lessor, to exercise in the Lessee's name all rights and powers of the "Buyer" under the Purchase Agreement and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity in respect of the Aircraft, except that the Lessee may not enter into any change order or other amendment, modification or supplement to the Purchase Agreement without the written consent or countersignature of the Lessor if such change order, amendment, modification or supplement would result in any rescission, cancellation or termination of the Purchase Agreement in respect of the Aircraft or in any way limit the rights of the Lessor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder. (c) Acceptance of Assignment. Subject to the terms hereof the Lessor accepts the assignment contained in this Section 2. (d) Requirement of Notice to AVSA. For all purposes of this Assignment, AVSA shall not be deemed to have knowledge of and need not recognize any Event of Default, unless and until AVSA shall have received written notice thereof from the Lessor or the Indenture Trustee addressed to its Chief Executive Officer, 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (telex 521155F) and, in acting in accordance with the terms of the Purchase Agreement and this Assignment, AVSA may act with acquittance and conclusively rely upon any such notice. 3. Certain Rights and Obligations of the Parties. (a) Assignor Remains Liable. It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) the Assignor shall at all times remain liable to AVSA under the Purchase Agreement to perform all the duties and obligations of the "Buyer" thereunder to the same extent as if this Assignment had not been executed; (b) the exercise by the Lessor of any of the rights assigned hereunder shall not release the Assignor from any of its duties or obligations to AVSA under the Purchase Agreement except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations; and (c) except as provided in the next succeeding paragraph, none of the Lessor, the Indenture Trustee nor any Participant shall have any obligation or liability under the Purchase Agreement by reason of, or arising out of, this Assignment or be obligated to perform any of the obligations or duties of the Assignor under the Purchase Agreement or to make any payment or to make any inquiry as to the sufficiency of any payment received by any of them or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. (b) Lessor Bound by Purchase Agreement. Without in any way releasing the Assignor from any of its duties or obligations under the Purchase Agreement, the Lessor confirms for the benefit of AVSA that, insofar as the provisions of the Purchase Agreement relate to the Aircraft, in exercising any rights under the Purchase Agreement, or in making any claim with respect to the Aircraft or other goods and services delivered or to be delivered pursuant to the Purchase Agreement, the terms and conditions of the Purchase Agreement disclosed to the Lessor in writing shall apply to, and be binding upon, the Lessor to the extent of its respective interests assigned hereunder to the same extent as the Assignor. (c) Limit of Effect of this Assignment. Nothing contained herein shall (i) subject AVSA or the Guarantor to any liability to which it would not otherwise be subject under the Purchase Agreement or (ii) modify in any respect the contractual rights of AVSA or the Guarantor thereunder (except, in each case, as provided in the attached Consents and Agreements). (d) Appointment as Attorney-in-Fact. The Assignor does hereby constitute, effective at any time after an Event of Default shall have occurred and be continuing, the Lessor and its successors and assigns to be the Assignor's true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due and to become due under, or arising out of, the Purchase Agreement and the Consent and Guaranty in respect of the Aircraft, to the extent that the same have been assigned as provided in this Assignment and, for such period as the Lessor, its successors and assigns may exercise rights with respect thereto under this Assignment, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute (or, if previously commenced, assume control of) any proceedings and to obtain any recovery in connection therewith which the Lessor, its successors and assigns, may deem to be necessary or advisable in the premises. 4. Further Assurances. The Assignor and the Lessor each agree that, at any time and from time to time, upon the written request of any other party hereto, it will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the other may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein granted. 5. Assignor's Representations, Warranties and Covenants. The Assignor does hereby represent and warrant that (a) the Purchase Agreement, insofar as it relates to the Aircraft, is in full force and effect and is enforceable against the Assignor in accordance with its terms, 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, and the Assignor is not in default thereunder, and (b) the Assignor has not assigned or pledged, and hereby covenants that it will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Aircraft under the Purchase Agreement not assigned hereby, to anyone other than the Lessor as herein provided. 6. No Amendment of Purchase Agreement. So long as the Lease is in effect, the Lessor agrees that it shall not enter into any agreement that would amend, modify, supplement, rescind, cancel or terminate the Purchase Agreement or the Consent and Guaranty in any respect or in any way limit the rights of the Assignor arising under Clauses 12 and 13 of the Purchase Agreement or any of the other rights assigned hereunder (except as set forth above when there has been an Event of Default) without the prior written consent of the Assignor. 7. Execution of Assignment. This Assignment is executed by the Assignor and the Lessor concurrently with the execution and delivery of the Participation Agreement and the Lease. 8. Confidentiality. The Lessor agrees that it will not disclose to any third party the terms of the Purchase Agreement or this Assignment, except (a) as required by applicable law or governmental regulation, (b) as contemplated in the Lease or the Participation Agreement (including as set forth in Section 17.01 of the Participation Agreement) or (c) with the consent of the Assignor, the Guarantor and AVSA. 9. Assignment as Collateral. Each party hereto consents to the assignment and pledge by the Lessor to the Indenture Trustee, as security for the Certificates to be issued under the Indenture and the other obligations secured thereby as specified in the Indenture, of all of the Lessor's right, title and interest in and to the Purchase Agreement and the Consent and Guaranty under this Assignment. 10. Counterparts. This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 12. Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13. Notices. All notices with respect to the matters contained herein shall be delivered in the manner and to the addresses provided in Article 14 of the Participation Agreement. 14. No Oral Amendments. Neither this Assignment 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 whom the enforcement of such termination, amendment, supplement, waiver or modification is sought. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By ________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Lessor By ________________________________________ Name: Donald E. Smith Title: Vice President AIRBUS INDUSTRIE CONSENT AND AGREEMENT The undersigned, Airbus Industrie G.I.E., a groupement d'interet economique established under Ordonnance No. 67-821 dated September 23, 1967 of the Republic of France (the "Guarantor"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N682FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, and agreements of the Guarantor under the Consent and Guaranty with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns, to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) the Guarantor will pay to the person or entity entitled to receive the corresponding payment from AVSA under the terms of the Assignment all amounts required to be paid by the Guarantor with respect to the Aircraft; (iii) the Guarantor consents to the sale of the Aircraft by AVSA to the Lessor, the assignment of Assignor's rights and interests under the Purchase Agreement and the Consent and Guaranty to the Lessor pursuant to the Assignment, the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and the lease of the Aircraft by the Lessor to the Assignor under the Lease; and (iv) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement, the Guarantor will not assert any lien or claim against the Aircraft or any part thereof or against the Lessee, the Lessor, the Initial Owner Participant or the Indenture Trustee arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. The Guarantor hereby represents and warrants that: (A) the Guarantor is a groupement d'interet economique duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement; (B) the making and performance, in accordance with their terms of the Consent and Guaranty, the Airbus Guaranty and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of the Guarantor, do not require the consent or approval of the members of the Guarantor, do not require the consent or approval of,or the giving of notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on the Guarantor or contravene the Guarantor's charter documents or any indenture, credit agreement or other contractual agreement to which the Guarantor is a party or by which it is bound; (C) the Consent and Guaranty constituted, as of the date thereof and at all times thereafter to and including the date of this Consent and Agreement, and each of this Consent and Agreement and the Airbus Guaranty constitutes, binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms; and (D) the Consent and Guaranty is in full force and effect. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AIRBUS INDUSTRIE G.I.E. By _____________________ Name: Title: AVSA CONSENT AND AGREEMENT The undersigned, AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France ("AVSA"), hereby acknowledges notice of and consents to all of the terms of the Purchase Agreement Assignment between Federal Express Corporation, a Delaware corporation, and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity, but solely as Lessor, with respect to Federal Express Corporation Trust No. N682FE, dated as of June 15, 1998 (hereinafter called the "Assignment", the defined terms therein being hereinafter used with the same meaning), and hereby confirms to the Assignor and the Lessor and their respective successors and assigns that: (i) except as provided in the Assignment, all representations, warranties, indemnities and agreements of AVSA under the Purchase Agreement with respect to the Aircraft shall inure to the benefit of the Lessor and its respective successors and assigns to the same extent as if the Lessor and its successors and assigns had originally been named the "Buyer" of the Aircraft therein; (ii) AVSA will pay to the Assignor all payments required to be paid by it under the Purchase Agreement, unless and until AVSA shall have received written notice from the Indenture Trustee or the Lessor (or, after the Indenture shall have been discharged in full, the Lessor) addressed to it at the address and in the manner set forth in the Assignment that an Event of Default has occurred and is continuing, whereupon AVSA will make any and all payments thereafter required to be made by it under the Purchase Agreement, to the extent that the right to receive such payment has been assigned under the Assignment ("AVSA Payments"), directly to the Indenture Trustee (or, after the Indenture shall have been discharged in full, the Lessor) if AVSA shall have received notice as aforesaid that an Event of Default has occurred and is continuing; (iii) The Lessor shall not be liable for any of the obligations or duties of the Assignor under the Purchase Agreement, nor shall the Assignment give rise to any duties or obligations whatsoever on the part of the Lessor owing to AVSA, except for the agreements of the Lessor set forth in the Assignment, including, but not limited to Section 3(b) of the Assignment; (iv) AVSA consents to the assignment of the Lessor's rights and interests in the Assignment to the Indenture Trustee pursuant to the Indenture and to the lease of the Aircraft by the Lessor to the Lessee under the Lease; and (v) from and after the delivery of the Aircraft pursuant to the Purchase Agreement and payment in full for the Aircraft as described in the Participation Agreement and the Assignment, AVSA will not assert any lien or claim against the Aircraft or any part thereof arising on or prior to such delivery or in respect of any work or services performed on or prior thereto. AVSA hereby represents and warrants that: (A) AVSA is a societe a responsabilite limitee duly organized and existing in good standing under the laws of the Republic of France and has the requisite power and authority to enter into and perform its obligations under the Purchase Agreement and this Consent and Agreement; (B) the making and performance, in accordance with their terms, of the Purchase Agreement and this Consent and Agreement have been duly authorized by all necessary corporate action on the part of AVSA, do not require any approval of AVSA's shareholders, do not require the consent or approval of, the giving notice to, or registration with, or the taking of any other action in respect of, any French governmental authority or agency except for those that have already been obtained and do not contravene any law binding on AVSA or contravene AVSA's charter documents or any indenture, credit agreement or other contractual agreement to which AVSA is a party or by which it is bound; (C) each of the Purchase Agreement and this Consent and Agreement constitutes a binding obligation of AVSA enforceable against AVSA in accordance with its terms, subject to: (i) the limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), which principles do not make the remedies available at law or in equity with respect to the Purchase Agreement and this Consent and Agreement inadequate for the practical realization of the benefits intended to be provided thereby and (D) the Purchase Agreement is in full force and effect as to AVSA. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Dated as of June 15, 1998 AVSA, S.A.R.L. By:_______________________ Name: Title: EXHIBIT F ENGINE WARRANTY ASSIGNMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) Words and phrases appearing in this Engine Warranty Assignment (the "Assignment") shall have the respective meanings as defined below: A. General Terms Agreement means that agreement dated as of July 3, 1991, (the "GTA") by and between the Engine Manufacturer and Federal Express Corporation ("Fed Ex"), including the Engine Product Support Plan at Exhibit B, insofar as such Product Support Plan relates to the Engine Warranties (the "Product Support Plan"), but excluding any and all letter agreements attached thereto. B. Engine Warranties means the Engine Manufacturer's New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty, as set forth in the Engine Manufacturer's Product Support Plan which forms a part of the GTA, and as limited by the applicable terms of such GTA and Product Support Plan. C. Engine means each of the CF6-80C2-A5F series engines installed on the aircraft at the time of delivery to the Assignor, each bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively. D. Replacement Engine means each of the CF6-80C2-A5F series engines which are not subject to this Assignment and are a replacement or substitute for an Engine, excluding, however, any engines obtained from the Engine Manufacturer's lease pool which are installed on the aircraft for the limited purpose of permitting the continued operation of the aircraft during the period necessary to effect or complete repairs or overhaul of an Engine. E. Lease means the Lease Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Lease") between State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee), as Lessor ("Lessor") and Fed Ex, as Lessee, as amended, modified or supplemented from time to time. All other capitalized terms used and not defined herein that are in the Lease shall, when used herein, have the meanings specified in the Lease. 1 Fed Ex, pursuant to the terms and conditions herein, hereby sells, assigns, transfers and sets over unto the Lessor all of its rights, claims and interests in and under the GTA and the Product Support Plan, as such apply to the Engines, to enforce in the Lessor's own name such rights as Fed Ex may have with respect to the Engine Warranties, to the extent the same relate to the Engines, and to retain any benefit resulting therefrom; provided, however, that there is reserved to Fed Ex all of its other rights, claims and interests under the GTA except as expressly stated above. Fed Ex shall, during the term of the Lease (but only so long as no Event of Default shall have occurred and be continuing), have the benefit of and shall be entitled to enforce (as it shall deem appropriate), either in its own name or (at the cost of Fed Ex) in the name of the Lessor for the use and benefit of Fed Ex, any and all Engine Warranties available to the Lessor under the GTA in respect of the Engines and each Part thereof, and the Lessor agrees (but only so long as no Event of Default shall have occurred and be continuing) at Fed Ex's expense to do, execute and deliver such further acts, deeds, matters or things as may be reasonably requested by Fed Ex and necessary to enable Fed Ex to obtain customary warranty services furnished for the Engines or any Part thereof pursuant to the Engine Warranties. Fed Ex shall, at the Lessor's expense, cooperate with the Lessor and take such action as the Lessor reasonably deems necessary to enable the Lessor to enforce such rights, claims and interests as assigned herein. 2 Notwithstanding anything in this Assignment or the Consent attached hereto and incorporated herein to the contrary, Fed Ex and the Lessor confirm expressly for the benefit of the Engine Manufacturer that: A. The Lessor agrees that it will not, without the prior written consent of the Engine Manufacturer, disclose, directly or indirectly, to any third party, any of the terms of the Engine Warranties disclosed to it by the Engine Manufacturer incident to effecting the assignment herein; provided, however, that (1) the Lessor may use, retain and disclose such information on a confidential basis to its special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (2) the Lessor may use, retain and disclose on a confidential basis such information to the Owner Participant, the Indenture Trustee, the Pass Through Trustee and any Certificate Holder, as the case may be, and their special counsel, independent insurance brokers, bank examiners or similar regulatory authorities, auditors and public accountants, (3) the Lessor may disclose such information as required by applicable laws, governmental regulations, subpoena, or other written demand under color of legal right, but it shall first, as soon as practicable upon receipt of such demand and to the extent permitted by applicable laws, furnish a copy thereof to Fed Ex and to the Engine Manufacturer, and the Lessor, to the extent permitted by applicable law, shall afford Fed Ex and the Engine Manufacturer reasonable opportunity, at the moving party's cost and expense, to obtain a protective order or other assurance reasonably satisfactory to the Engine Manufacturer of confidential treatment of the information required to be disclosed, (4) the Lessor may disclose such information as required to enforce its rights under the Engine Warranties assigned to it pursuant to this Assignment, and (5) the Lessor may disclose such information to any bona fide potential purchaser of the Aircraft and/or Engines or any beneficial interest therein (subject to the execution by such prospective purchaser of a written confidentiality statement setting forth the same or substantially similar terms as those referred to in this paragraph). B. Without in any way releasing Fed Ex from any of its duties or obligations under the GTA, the Lessor agrees that, insofar as the provisions of the GTA relate to the Engines, in exercising any rights under such Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA, including Article Eight (Limitation of Liability) and the Product Support Plan, shall apply to, and be binding upon, the Lessor to the same extent as Fed Ex. C. Insofar as the provisions of the GTA relate to the Engines, in exercising any rights under the Engine Warranties or in making any claim with respect thereto, the applicable terms and conditions of the GTA and the Product Support Plan or the Consent attached hereto and incorporated herein shall apply to, and be binding upon, the Lessor to the same extent as if named "Airline" therein. It is expressly agreed that Fed Ex shall at all times remain liable to the Engine Manufacturer under the GTA to perform all the duties and obligations of Fed Ex thereunder to the same extent as if this Assignment had not been executed. The performance by the Lessor of any of the rights assigned hereunder shall not release Fed Ex from any of its duties or obligations to the Engine Manufacturer under the GTA except to the extent that such exercise by the Lessor shall constitute performance of such duties and obligations. D. Nothing contained in this Assignment shall subject the Engine Manufacturer to any obligation or liability to which it would not otherwise be subject under the GTA or modify in any respect the Engine Manufacturer's contract rights thereunder, or subject the Engine Manufacturer to any multiple or duplicative liability or obligation under the GTA. The Engine Manufacturer recognizes and it is consented to by all parties to this Assignment that the Lessor shall collaterally assign its rights under the Lease and this Assignment and will mortgage the Aircraft and Engines, to First Security Bank, National Association, as Indenture Trustee under the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (on the terms set forth therein); however, no further extension or assignment (except to a successor indenture trustee under such agreement) of any remaining Engine Warranties, including but not limited to extensions or assignments for security purposes, are permitted without the prior written consent of the Engine Manufacturer. E. Exclusive of the assignment noted in Section 2D above, the Engine Manufacturer shall not be deemed to have knowledge of any change in the authority of Fed Ex or the Lessor, as the case may be, to exercise the rights established hereunder until the Engine Manufacturer has received written notice thereof from the Indenture Trustee or the Lessor. Such notice shall be sent to: Commercial Contracts Director, GE Aircraft Engines, Mail Drop F17, One Neumann Way, Box 156301, Cincinnati, Ohio 45215-6301, facsimile: (513) 243-8068. F. This Assignment shall apply only in respect to each Engine and shall not extend to any replacement or substitute engine. If, during the term of this Assignment and the Lease, it becomes necessary to replace or substitute an Engine due to a Failure (as such term is defined in the Engine Product Support Plan, excluding normal wear, tear and deterioration which can be restored by overhaul and repair), damage or loss, the Assignor (or the Lessor) shall give the Engine Manufacturer written notice of such Failure, damage or loss. The notice shall include (i) a description of the event or circumstances which constitute a Failure, damage or loss, and (ii) the serial numbers of the (a) failed, damaged or lost Engine and (b) Replacement Engine and shall be sent to: Customer Support Manager, GE Aircraft Engines, 111 Merchant Street, Room 450, Cincinnati, Ohio 45246. The Engine Manufacturer shall not be deemed to have knowledge of the need for a replacement engine until it has received the aforementioned notice. In the event an Engine subject to this Assignment fails, is damaged or lost, and such Engine is replaced by a Replacement Engine, the Assignor and the Assignee shall, prior to, or contemporaneous with, the delivery of such Replacement Engine, obtain the written consent of the Engine Manufacturer (which it shall be obligated to give) that the Engine Warranties as set forth in the Engine Product Support Plan shall apply to such Replacement Engines. The Engine Manufacturer shall not incur any obligation or liability for a Replacement Engine under the Engine Warranties until the execution of the aforementioned consent. G. At any time and upon the written request of the Engine Manufacturer, Fed Ex and the Lessor shall promptly and duly execute and deliver any and all such further assurances, instruments and documents and take all such further action, at the expense of Fed Ex, as the Engine Manufacturer may reasonably request in order to obtain the full benefit of Fed Ex and the Lessor's agreement as set forth in this Assignment and the Consent attached hereto and incorporated herein. Any performance by the Engine Manufacturer that discharges its obligation under the Engine Warranties will satisfy the respective interests of Fed Ex and the Lessor. So long as the Engine Manufacturer acts in good faith in accordance with this Assignment, the Engine Manufacturer may rely conclusively on any notice given pursuant to this Assignment without inquiring as to the accuracy of, or the entitlement of the party to give, such notice. 3 The Engine Manufacturer shall reserve to Fed Ex all those rights, claims and interests, as and to the extent such relates to the purchase and operation of engines other than the Engines subject to the Assignment, as well as other matters not directly pertaining to the Engines, and Fed Ex will have or retain under the GTA such rights, claims and interest not expressly assigned to the Lessor hereunder. 4 The Engine Manufacturer warrants each new Reverser (as such is defined in the Engine Product Support Plan) installed on the Aircraft at the time of delivery to Fed Ex under the terms of the New Engine Warranty; however, administration of such New Engine Warranty, with respect to both installed and replacement Reversers, shall be performed by Martin Marietta. 5 If at some point in time, the Engine Manufacturer receives written notification from the Indenture Trustee or the Lessor that the Lessor is or becomes entitled to possession of the Engines, pursuant to an Event of Default or otherwise, and desires to sell or lease the Engines to a party who is not currently a party to a General Terms Agreement with the Engine Manufacturer, the Engine Manufacturer agrees if such agreement is permissible under applicable U.S. law, that it will offer to such purchaser or lessee, subject to the execution of an agreement to sell or lease such Engines, a General Terms Agreement on the Engine Manufacturer's standard terms and conditions. If, however, such purchaser or lessee is currently a party to a General Terms Agreement with the Engine Manufacturer, the remaining portion of the terms of such General Terms Agreement shall be extended to and apply to such subsequent purchase or lease; provided, however, that the written consent of the Engine Manufacturer to such an extension is obtained prior to the transaction's occurrence. This Assignment shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. In witness whereof, the parties hereto have caused this Engine Warranty Assignment to be duly executed and delivered as of the date hereof. General Electric Company _____________________________ Name: Title: Federal Express Corporation _____________________________ Name: Robert D. Henning Title: Vice President and Treasurer State Street Bank and Trust Company of Connecticut, National Association not in its individual capacity, but solely as Owner Trustee _____________________________ Name: Donald E. Smith Title: Vice President CONSENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) The Engine Manufacturer, General Electric Company (the "Engine Manufacturer"), a New York corporation, hereby consents to the Engine Warranty Assignment attached hereto and acknowledges notice of (i) the Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 and entered into by and between Federal Express Corporation, as Assignor ("Fed Ex") and State Street Bank and Trust Company of Connecticut, National Association (not in its individual capacity, but solely as Owner Trustee) as Assignee ("Lessor"), (the "Purchase Agreement Assignment"); and (ii) the Lease Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 and entered into by and between Fed Ex, as Lessee and the Lessor, as Lessor (as in effect from time to time, the "Lease") and (iii) the Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 (the "Indenture"), between the Lessor and First Security Bank, National Association, as Indenture Trustee ("Indenture Trustee"). The Purchase Agreement Assignment and Lease cover two GE CF6-80C2-A5F series engines bearing Engine Manufacturer's serial numbers ___-___ and ___-___, respectively, (the "Engines") as installed on the Airbus A300F4-605R series aircraft bearing Manufacturer's serial number 800 (the "Aircraft"). In connection with such Purchase Agreement Assignment and Lease, reference is made to the General Terms Agreement No. 6-9034 dated as of July 3, 1991, between the Engine Manufacturer and Fed Ex (the "General Terms Agreement"), under which the Engine Manufacturer agreed to support certain GE CF6-80C2-A5F series engines, including the Engines and spare parts therefor to be purchased by Fed Ex from the Engine Manufacturer, as installed on certain Airbus A300F4-605R series aircraft, including the Aircraft. Recognizing that the Lessor and Fed Ex have entered into the Lease which provides for the lease by the Lessor to Fed Ex of the Aircraft and Engines and that the Lessor has granted a security interest in the Engines and assigned certain of its rights under the Lease to the Indenture Trustee, the Engine Manufacturer agrees that in furtherance of the Lease, it will so support such Engines and spare parts therefor, subject to the applicable terms and conditions of the General Terms Agreement, including Article Eight (Limitation of Liability). The Engine Manufacturer represents and warrants that: 1. it is a corporation existing in good standing under the laws of the State of New York; 2. the making and performance of this Consent in accordance with its terms has been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, does not require any shareholder approval and does not contravene its certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; 3. the making and performance of the Engine Warranties, as defined in the Engine Warranty Assignment attached hereto (the "Engine Warranties") in accordance with their terms have been duly authorized by all necessary corporate action on the part of the Engine Manufacturer, do not require any shareholder approval and do not contravene the Engine Manufacturer's certificate of incorporation or by-laws or any debenture, credit agreement or other contractual agreement to which the Engine Manufacturer is a party or by which it is bound or any law binding on the Engine Manufacturer; and 4. the Engine Warranties constitute, as of the date on which they were made and at all times thereafter, and this Consent and the Engine Warranty Assignment attached hereto are, binding obligations of the Engine Manufacturer enforceable against the Engine Manufacturer in accordance with its terms subject to: (a) the limitation of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally; and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Consent shall be governed by the laws of the State of New York, including all matters of construction, validity and performance, as applicable to contracts between citizens of that state to be performed wholly within that state, and without reference to conflicts of law principles. General Electric Company ______________________________ Name: Title: EX-4.D 9 EXHIBIT 4.d - -------------------------------------------------------------------------------- TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48481, REGISTRATION NO. N585FE - -------------------------------------------------------------------------------- Page ---- TABLE OF CONTENTS ----------------- PARTIES...................................................................... 1 RECITALS.................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............ 1 Section 1.02. Declaration of Trust.................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor. .......... 2 Section 1.04. Prohibited Activity..................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc.......................... 3 Section 2.02. Excepted Payments. ..................................... 4 Section 2.03. Other Receipts. ........................................ 4 Section 2.04. Distributions after Default. ........................... 4 Section 2.05. Distributions after Release of Lien of Indenture. ...... 4 Section 2.06. Manner of Making Distributions. ........................ 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties.......................... 5 Section 3.02. Limitation on Authority of Owner Trustee. .............. 6 Section 3.03. Notice of Default. ..................................... 6 Section 3.04. Action Upon Instructions................................ 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee.... 7 Section 3.06. Certain Rights of Owner Trustee......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters.. 10 Section 3.08. Status of Moneys Received............................... 10 Section 3.09. Self-Dealing............................................ 11 Section 3.10. Definition of a Responsible Officer..................... 11 Section 3.11. Resignation or Removal of Owner Trustee................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............ 11 Section 3.13. Merger or Consolidation of SSB.......................... 12 Section 3.14. Co-Trustees. ........................................... 12 Section 3.15. Interpretation of Agreements............................ 13 Section 3.16. Not Acting in Individual Capacity....................... 14 Section 3.17. Tax Returns. ........................................... 14 Section 3.18. Independent Business.................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. ........................................... 16 Section 4.02. Distribution of Lessor's Estate upon Termination. ...... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification......................................... 17 Section 6.02. Supplements and Amendments.............................. 19 Section 6.03. Nature of Title of Trustor.............................. 19 Section 6.04. Power of Owner Trustee to Convey........................ 19 Section 6.05. Notices. ........................................... 20 Section 6.06. Situs of Trust; Applicable Law; Severability............ 21 Section 6.07. Successors and Assigns.................................. 21 Section 6.08. Headings and Table of Contents.......................... 21 Section 6.09. Identification of Trust................................. 21 Section 6.10. Counterparts............................................ 21 Section 6.11. Trustor Interest. ...................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from the Lessee on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from the Lessee on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by the Lessee and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N585FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _______________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _______________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N585FE and Manufacturer's serial number 48481, together with three General Electric CF6-80C2-D1F engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N585FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on January 15, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N585FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 14, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A- 1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N585FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2013 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------- TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) Dated as of May 1, 1998 Amended and Restated as of June 15, 1998 between BMO LEASING (U.S.), INC., Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48505, REGISTRATION NO. N590FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 2 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent..................................... 2 Section 1.04. Prohibited Activity...................................... 3 ARTICLE 2 DISTRIBUTIONS Section 2.01. Rent, Etc................................................ 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 7 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 11 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 12 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 14 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 15 Section 4.02. Distribution of Lessor's Estate upon Termination......... 16 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 18 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 20 Section 6.04. Power of Owner Trustee to Convey......................... 20 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 22 Section 6.10. Counterparts............................................. 22 Section 6.11. Trustor Interest......................................... 22 Section 6.12. Performance by the Trustor............................... 22 Section 6.13. Limitations on Control. Exceptions...................... 22 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and BMO LEASING (U.S.), INC., a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor and SSB have heretofore entered into the Original Trust Agreement; WHEREAS, the Original Trust Agreement was duly filed with the Federal Aviation Administration on May 27, 1998; WHEREAS, the Original Loan Participant participated in the payment of the Purchase Price by providing financing as evidenced by the Original Loan Certificates; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the Lessee, the Trustor and the Owner Trustee desire to refinance all of the Original Loan Certificates on the Refunding Date; and WHEREAS, the Trustor and SSB desire, in connection with such refinancing, to amend and restate the Original Trust Agreement in its entirety as herein provided. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree that the Original Trust Agreement be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) on the Refunding Date to execute and deliver each of the Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements and the Original Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements and the Original Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby confirms, in its individual capacity, that it holds and will continue to hold, in its capacity as the Owner Trustee, the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the terms and conditions of Section 4.01 of the Participation Agreement shall have been complied with in a manner satisfactory to the Owner Trustee and the Trustor. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Rent, Etc. The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be paid to the Indenture Trustee while the Lien of the Indenture is in effect. Except as otherwise provided in Section 2.04 hereof, the Owner Trustee shall promptly apply each payment of the Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01, or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to the account set forth in the Participation Agreement or to such other account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its representations, warranties and covenants given in its individual capacity in Sections 3.05 and 3.08 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require SSB in its individual capacity 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. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements or the Original Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor and (to the extent provided in the Indenture) the Indenture Trustee copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever right, title and interests in, to and under the Aircraft that were conveyed to it by the Lessee and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Department of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee for cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Owner Trustee by an instrument in writing signed by it, shall appoint one or more Persons approved by the Trustor to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon request, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that (i) if at the time of any termination the Lease remains in force and effect, then the Lessor's Estate shall be sold as a unit (and not in parcels) and subject to the Lease, and (ii) in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Trustor may assign, convey or otherwise transfer to a single institutional investor all (but not less than all) of the Beneficial Interest, provided that it gives the Lessee and the Indenture Trustee at least 10 Business Days' notice of such assignment, conveyance or other transfer and provided further that the Trustor shall remain liable for all obligations of the Trustor under this Agreement and the Operative Agreements to which the Trustor is a party to the extent (but only to the extent) incurred on or before the date of such transfer and provided that the transferee agrees by a written instrument in form and substance reasonably satisfactory to the Indenture Trustee, the Owner Trustee and the Lessee to assume primary liability for all obligations as a trustor under this Agreement and the other Operative Agreements to which such trustor is a party incurred after the date of transfer and the Trustor shall remain secondarily liable for all such obligations assumed by its successor as Trustor; provided, that the Trustor need not so agree to remain and shall not be so secondarily liable if (a) such transferee is (i) a bank, savings institution, finance company, leasing company or trust company, national banking association acting for its own account or in a fiduciary capacity as trustee or agent under any pension, retirement, profit sharing or similar trust or fund, insurance company, fraternal benefit society or corporation acting for its own account having a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent) of not less than $75,000,000, (ii) a subsidiary of any Person described in clause (i) where such Person provides (A) support for the obligations assumed by such transferee subsidiary satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee or (B) an unconditional guaranty satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee of such transferee subsidiary's obligations, or (iii) an Affiliate of the original Trustor, so long as such Affiliate has a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent) of not less than $75,000,000, (b) such transferee is legally capable of binding itself to the obligations of the Trustor and expressly agrees to assume all obligations of the Trustor under the Participation Agreement and this Agreement and (c) such transferee shall provide representations substantially similar to those contained in Section 7.03(a) of the Participation Agreement. In the event of any such assignment, conveyance or transfer, the transferee shall become a party to this Agreement and shall agree to be bound by all the terms of and will undertake all of the obligations of the Trustor contained in this Agreement and the other Operative Agreements in such manner as is reasonably satisfactory to the Owner Trustee, the Indenture Trustee and the Lessee. A transferee hereunder shall be (i) a "U.S. Person" as defined in Section 7701(a)(30) of the Code (or any successor provision thereto) or if the transferee shall not be such "U.S. Person" then each Certificate Holder shall be provided an indemnity in form and substance satisfactory to each such Certificate Holder, for any Taxes that may be imposed on such Certificate Holders (currently or in the future) due to such transferee's failure to be such a "U.S. Person" and (ii) a Citizen of the United States or has established a voting trust, voting powers or other arrangement reasonably satisfactory to the Indenture Trustee and the Lessee to permit the Owner Trustee to be the registered owner of the Aircraft under the Transportation Code. A transferee hereunder shall not be, and in acquiring the Beneficial Interest shall not use the assets of, an ERISA Plan. Assuming the truth of the representations made in Section 6.01(m) of the Participation Agreement and compliance with Section 10.06 of the Indenture, no such assignment, conveyance or transfer shall violate any provision of law or regulation or create a relationship which would be in violation thereof. The Owner Trustee shall not be on notice of or otherwise bound by any such assignment, conveyance or transfer unless and until it shall have received an executed counterpart of the instrument of such assignment, conveyance or transfer. Upon any such disposition by the Trustor to a transferee as above provided, the transferee shall be deemed the "Trustor" for all purposes hereof, and shall be deemed to have made all the payments previously made by its transferor and to have acquired the same interest in the Lessor's Estate as theretofore held by its transferor; and each reference herein to the "Trustor" shall thereafter be deemed a reference to such transferee. Notwithstanding anything to the contrary contained in this Article 5, in no event shall the Trustor transfer its interest in the Beneficial Interest to any entity whose business is that of a nationwide or worldwide overnight or expedited delivery small package air courier, cargo or freight deliverer and which competes with the Lessee. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agree to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including taxes (excluding taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements or the Original Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Original Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and its assigns (but subject to the rights of the Lessee under the Operative Agreements or the Original Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Owner Participant shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in Sections 3.05 and 3.08 of the Indenture or elsewhere in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from indemnification pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii) and (v) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from indemnification pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii), and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Owner Participant); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Article VIII of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. The Trustor shall not have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trusts hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: BMO Leasing (U.S.), Inc. c/o Bank of Montreal 115 South LaSalle Street Chicago, Illinois 60603 Attention: BMO Leasing (U.S.), Inc. Telephone: (312) 750-3791 Facsimile: (312) 658-4616 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This trust may for convenience be referred to as the "Federal Express Corporation Trust No. N590FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this trust (as opposed to the Trustor's beneficial interest in this trust). Section 6.12. Performance by the Trustor. Any obligation of the Owner Trustee hereunder or under any Operative Agreement or other document contemplated herein may be performed by the Trustor and any such performance shall not be construed as a revocation of the trust created hereby. Section 6.13. Limitations on Control. Exceptions. (a) Limitations on Control. Notwithstanding any other provision of this Agreement, but subject to paragraph (b) of this Section 6.13, the Trustor will not have any rights or powers to direct, influence or control the Owner Trustee in the performance of the Owner Trustee's duties under this Agreement in connection with matters involving the ownership and operation of the Aircraft by the Owner Trustee. In all matters involving the ownership and operation of the Aircraft by the Owner Trustee, the Owner Trustee shall have absolute and complete discretion in connection therewith and shall be free of any kind of influence or control whatsoever by the Trustor, and the Owner Trustee shall exercise its duties under this Agreement in connection with matters involving the ownership and operation of the Aircraft by the Owner Trustee as it, in its discretion, shall deem necessary to protect the interests of the United States, notwithstanding any countervailing interest of any foreign power which, or whose citizens, may have a direct or indirect interest in the Trustor and any such action by the Owner Trustee shall not be considered malfeasance or in breach of any obligation which the Owner Trustee might otherwise have to the Trustor; provided, however, that subject to the foregoing limitations, the Owner Trustee shall exercise this discretion in all matters involving the ownership and operation of the Aircraft by the Owner Trustee with due regard for the interests of the Trustor. In exercising any of its rights and duties under this Agreement in connection with matters which may arise not relating to the ownership and operation of the Aircraft, the Owner Trustee shall be permitted to seek the advice of the Trustor before taking, or refraining from taking, any action with respect thereto. The Owner Trustee shall notify the Trustor of its exercise of rights and duties under this Agreement in connection with matters involving the ownership and operation of the Aircraft by the Owner Trustee. (b) Certain Exceptions. Subject to the requirements of the preceding paragraph (a), the Owner Trustee agrees that it will not, without the prior written consent of the Trustor, (i) sell, mortgage, pledge or otherwise dispose of the Aircraft or other assets held in the Trust Estate relating thereto except as otherwise expressly provided for herein, or (ii) amend any Lease or give any consents thereunder. (c) Purposes. The purpose of this Section 6.13 is to give the Owner Trustee the power to manage and control the Aircraft with respect to matters involving the ownership and operation of the Aircraft by the Owner Trustee so as to assure that (i) the Aircraft shall be controlled with respect to such matters by a Citizen of the United States and (ii) the Trustor shall have no power to influence or control the exercise of the Owner Trustee's authority with respect to such matters and (iii) the Owner Trustee shall be able to give the affidavit required by Section 47.7(c)(2)(iii) of the Federal Aviation Regulations, 14 C.F.R. 47.7(c)(2)(iii). This Section 6.13 shall be construed in furtherance of the foregoing purpose. IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. BMO LEASING (U.S.), INC. By: _________________________________________________ Name: Title: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreements. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 27, 2020, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Chicago, Illinois, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N590FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing on or prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. May 27, 1998. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of May 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(ix) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. If an Event of Loss described in any of clauses (i) (A), (iii), (iv) or (v) above shall occur, Lessor may elect, within 30 days following the date upon which such Event of Loss is deemed to have occurred, to waive such Event of Loss and the consequences thereof. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. FSC. Global Capital Solutions Ltd., a Barbados corporation. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes or Expenses imposed against the Indenture Trustee which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of May 1, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity or the Owner Participant) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. McDonnell Douglas Corporation, a Maryland corporation. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than (i) a citizen or resident of the United States, as defined in Section 7701(a)(30) of the Code, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or therein, or (iii) any estate or trust that is subject to United States federal income taxation regardless of the source of its income. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on May 27, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136036. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136037. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on May 27, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessee and the Owner Participant as it was originally executed on May 27, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on May 27, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Bankmont Financial Corp., a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Article 5 of the Trust Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's (i) nominal after-tax yield and aggregate after-tax cash flow during the Basic Term and (ii) nominal after-tax yield and aggregate after-tax cash flow assumed to be realized through the date on which the option under Section 4.02(a)(F) of the Lease may be exercised, in each case, utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement thereof in accordance with the Lease, which may be removed therefrom. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Price. Has the meaning specified in Ancillary Agreement I. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 27, 2020 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, with respect to the Owner Participant, the president or any vice president with direct responsibility for the transactions contemplated by the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease under the heading "Stipulated Loss Value Date." Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after July 15, 2006 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2011 and January 15, 2014, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the fifth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. - ------------------------------------------------------------------------------ TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48791, REGISTRATION NO. N620FE - ------------------------------------------------------------------------------ Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from the Lessee on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from the Lessee on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by the Lessee and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N620FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N620FE and Manufacturer's serial number 48791, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N620FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N620FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. June 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N620FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------ TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48792, REGISTRATION NO. N621FE - ------------------------------------------------------------------------------ Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from the Lessee on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from the Lessee on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by the Lessee and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N621FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N621FE and Manufacturer's serial number 48792, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N621FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N621FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N621FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a)(i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2015 or January 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - -------------------------------------------------------------------------------- TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48794, REGISTRATION NO. N623FE - -------------------------------------------------------------------------------- Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from the Lessee on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from the Lessee on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by the Lessee and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N623FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N623FE and Manufacturer's serial number 48794, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N623FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N623FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N623FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. - ------------------------------------------------------------------------------- TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) Dated as of June 1, 1998 Amended and Restated as of June 15, 1998 between PMCC LEASING CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 789, REGISTRATION NO. N675FE - ------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 2 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent..................................... 2 Section 1.04. Prohibited Activity...................................... 3 ARTICLE 2 DISTRIBUTIONS Section 2.01. Rent, Etc................................................ 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Distributions after Release of Lien of Indenture......... 4 Section 2.04. Manner of Making Distributions........................... 4 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 5 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 6 Section 3.06. Certain Rights of Owner Trustee.......................... 7 Section 3.07. No Representations or Warranties as to Certain Matters... 9 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 10 Section 3.10. Definition of a Responsible Officer...................... 10 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 13 Section 3.17. Books and Records; Tax Returns........................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 14 Section 4.02. Termination at Option of the Trustor..................... 15 Section 4.03. Distribution of Lessor's Estate upon Termination......... 15 ARTICLE 5 [RESERVED] ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 16 Section 6.02. Limitations on the Trustor's Liability................... 17 Section 6.03. Fees; Compensation....................................... 17 Section 6.04. Supplements and Amendments............................... 17 Section 6.05. Nature of Title of Trustor............................... 17 Section 6.06. Power of Owner Trustee to Convey......................... 18 Section 6.07. Notices.................................................. 18 Section 6.08. Situs of Trust; Applicable Law; Severability............. 19 Section 6.09. Successors and Assigns................................... 19 Section 6.10. Headings and Table of Contents........................... 19 Section 6.11. Identification of Trust.................................. 19 Section 6.12. Counterparts............................................. 19 Section 6.13. Trustor Interest......................................... 19 Section 6.14. Performance by the Trustor............................... 20 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and PMCC LEASING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor and SSB have heretofore entered into the Original Trust Agreement; WHEREAS, the Original Trust Agreement was duly filed with the Federal Aviation Administration on June 18, 1998; WHEREAS, the Original Loan Participant participated in the payment of the Purchase Price by providing financing as evidenced by the Original Loan Certificates; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the Lessee, the Trustor and the Owner Trustee desire to refinance all of the Original Loan Certificates on the Refunding Date; and WHEREAS, the Trustor and SSB desire, in connection with such refinancing, to amend and restate the Original Trust Agreement in its entirety as herein provided. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree that the Original Trust Agreement be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) on the Refunding Date to execute and deliver each of the Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements and the Original Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements and the Original Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby confirms, in its individual capacity, that it holds and will continue to hold, in its capacity as the Owner Trustee, the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the terms and conditions of Section 4.01 of the Participation Agreement shall have been complied with in a manner satisfactory to the Owner Trustee and the Trustor. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Rent, Etc. The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below, the Owner Trustee shall promptly apply each payment of the Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01, or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. Notwithstanding any other provision contained herein, all Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person entitled thereto, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01 and 2.02 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.03 remaining as part of the Lessor's Estate after the Lien of the Indenture has been released, shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.04. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to the account set forth in the Participation Agreement or to such other account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 2:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.02(a) and (b) and 7.04 of the Participation Agreement or its representations, warranties and covenants given in its individual capacity in Sections 3.05 and 3.08 of the Indenture, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to, and agrees that it will not, manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt telephone or facsimile notice, followed by prompt confirmation thereof by certified mail, postage prepaid (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any (and shall take no) action whatsoever in the absence of written instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with written instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require SSB in its individual capacity 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. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements or the Original Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor and (to the extent provided in the Indenture) the Indenture Trustee copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever right, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Department of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, in form and substance acceptable to the predecessor Owner Trustee and the Trustor and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Owner Trustee by an instrument in writing signed by it, shall appoint one or more Persons approved by the Trustor to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith in what it deems to be the best interests of the Trustor or for any failure to act in any situation described above in this Section 3.15. The provisions of this Section 3.15 shall not be applicable to the Owner Trustee's obligations set forth in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Books and Records; Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to its receipt and disbursement of all moneys under this Agreement or any Operative Agreement and shall, upon the request of the Trustor or its duly authorized representative, make available such books and records at its principal trust office during normal business hours for inspection and copying. The Owner Trustee agrees to sign and file all returns with respect to Taxes that the Trustor prepares (or causes to be prepared) and directs the Owner Trustee to sign and file. The Owner Trustee, upon request, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. At the request of the Trustor, and at the expense of the Lessee, the Owner Trustee shall file an application with the Internal Revenue Service for a taxpayer identification number with respect to the trust created hereunder and prepare or cause to be prepared and sign and/or file the Federal fiduciary tax return with respect to Taxes due and payable by the Trust in connection with the transactions contemplated hereby or by any other Operative Agreement; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. The Owner Trustee shall keep copies of all returns delivered to or filed by it. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (b) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. Section 4.02. Termination at Option of the Trustor. Notwithstanding Section 4.01 hereof, this Agreement and the trust created hereby shall terminate and the Trust Estate shall be distributed to the Trustor, and this Agreement shall be of no further force and effect, upon the election of the Trustor by notice to the Owner Trustee, if such notice shall be accompanied by the written agreement (in form and substance satisfactory to the Owner Trustee) of the Trustor assuming all the obligations of the Owner Trustee under or contemplated by the Operative Agreements or incurred by it as trustee hereunder and releasing the Owner Trustee therefrom; provided, however, that such notice may be given only after the time the Lien of the Indenture is discharged under Section 14.01 of the Indenture and the Lease has terminated unless the Trustor shall have received the prior written consent of the Indenture Trustee to any such termination in which case such notice may be given while the Lien of the Indenture is outstanding. Section 4.03. Distribution of Lessor's Estate upon Termination. Upon any termination of this trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that (i) if at the time of any termination the Lease remains in force and effect, then the Lessor's Estate shall be sold as a unit (and not in parcels) and subject to the Lease, and (ii) in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 [RESERVED] ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor shall assume liability for, and shall indemnify, protect, save and keep harmless SSB from and against any and all liabilities, obligations, losses, damages, penalties, taxes, claims, actions, proceedings, suits, costs (including reasonable attorneys' fees), expenses and disbursements of any kind and nature whatsoever ("Trust Claims") imposed on, incurred by or asserted against the Owner Trustee or SSB, as the case may be (but only to the extent the Owner Trustee or SSB, as the case may be, is not indemnified by the Lessee for such Trust Claims under any Operative Agreement or is not indemnified by any other Person for such Trust Claims, within a reasonable time after demand therefor), in any way relating to or arising out of (X) the Trust Estate or any of the properties included therein and (Y) the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder or under the Operative Agreements including, but not limited to, claims under any Environmental Laws; provided, however, that (a) the Trustor shall not be required to indemnify the Owner Trustee or SSB in the case of (i) willful misconduct, negligence with respect to handling of funds, gross negligence or bad faith of the Owner Trustee or SSB, as the case may be, (ii) the Owner Trustee's or SSB's failure to use ordinary care in the handling of monies constituting part of the Trust Estate, (iii) Taxes of the Owner Trustee or SSB, as the case may be, that are based on or measured by the compensation received by SSB for acting as Owner Trustee hereunder, and (iv) items excluded from indemnification by the Lessee as, as to the extent, provided in Sections 8.01(b)(i), (ii) and (iv)-(xii) and 9.01(b)(i), (iii)-(ix) of the Participation Agreement, and (b) the Trustor shall not be required to indemnify with respect to Trust Claims resulting from a breach of the covenants by SSB in Article 3 hereof or Trust Claims resulting because any representation or warranty of the Owner Trustee or SSB, as the case may be, contained in any Operative Agreement proves to be untrue or inaccurate or the failure by the Owner Trustee or SSB, as the case may be, to perform or observe any agreements, covenants or conditions to be performed or observed by it in any of the Operative Agreements. None of the foregoing exclusions shall limit the obligation of the Trustor to indemnify SSB (but SSB shall still be required to seek indemnification from the Lessee before making a claim against the Trustor hereunder unless such exclusion is otherwise limited under Sections 8.01(b) and 9.01(b) of the Participation Agreement), (i) for actions taken in accordance with written instructions received from the Trustor, and (ii) to the extent such exclusions are attributable to acts or omissions of the Trustor. The payor of any indemnity under this Section 6.01 shall be subrogated to any right of the person indemnified in respect of the matter as to which such indemnity was paid. The indemnities contained in this Section 6.01 shall survive the termination of this Agreement. Section 6.02. Limitations on the Trustor's Liability. The Trustor shall not have any liability for the performance of this Agreement except as expressly set forth herein. Section 6.03. Fees; Compensation. Except as provided in Section 3.06(e) or 6.01 hereof, the Owner Trustee agrees that it shall have no right against the Trustor or the Trust Estate for any fee as compensation for its services hereunder. Section 6.04. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Trustor and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Trustor and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document and (iii) any amendment or supplement to this Agreement shall comply with the provisions of Section 7.13 of the Participation Agreement. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.05. Nature of Title of Trustor. The Trustor shall not have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.06. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee in and to the Operative Agreements or the right, title and interest of the Owner Trustee and the Trustor in and to the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.07. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service or other means, when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: PMCC Leasing Corporation 200 First Stamford Place Stamford, Connecticut 06902 Attention: Vice President Leasing with a copy to Director, Portfolio Administration Telephone: (914) 335-5000 Facsimile: (914) 335-8301 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.08. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.09. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Section 7.03(d) of the Participation Agreement. Section 6.10. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.11. Identification of Trust. This trust may for convenience be referred to as the "Federal Express Corporation Trust No. N675FE." Section 6.12. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.13. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this trust (as opposed to the Trustor's beneficial interest in this trust). Section 6.14. Performance by the Trustor. Any obligation of the Owner Trustee hereunder or under any Operative Agreement or other document contemplated herein may be performed by the Trustor and any such performance shall not be construed as a revocation of the trust created hereby. IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. PMCC LEASING CORPORATION By: _________________________________________________ Name: Thomas W. Urbach Title: Vice President STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment to be received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment to be received. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreement II. The Ancillary Agreement II (Federal Express Corporation Trust No. N675FE), dated the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Assignment and Assumption Agreement. Any agreement delivered in compliance with Section 7.03(d) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 18, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Stamford, Connecticut, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. June 18, 1998. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(xii) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 60 days due to theft or disappearance or such longer period, not to exceed 180 days from the end of such initial 60-day period, if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such theft or disappearance constitutes an Event of Loss pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twenty-four (24) consecutive months or until the end of the Term, if earlier. The date of such Event of Loss shall be (s) the 61st day or the 241st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term or the Lessee's abandonment of diligent efforts to recover such property, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 12 month or 24 month period, referred to in clause (iv) above (or if earlier, the end of the Term or abandonment of the Lessee's efforts to restore the normal use of the Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity, expense, reimbursement or other payments paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any other Operative Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with Section 13.05 of the Lease but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any purchase price paid to the Owner Participant for its interest in the Trust Estate pursuant to Section 7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vi) above and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (v) and (vii) above (except with respect to interest attributable to payments referred to in clause (vi) above). Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming the Aircraft (or other property) is unencumbered by the Lease. In such determination, except for purposes of Section 17.01 of the Lease (when it shall be determined based upon the actual condition and location of the Aircraft), it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. French Pledge Agreement. The French Pledge Agreement dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity in respect of which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant, the Original Loan Participants or any other Holder or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to the Original Loan Participants or any other Holder, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof and which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which are severable from the Aircraft in accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of the Lease and the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, any Assignment and Assumption Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on June 18, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27401. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27402. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on June 18, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessee and the Owner Participant as it was originally executed on June 18, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on June 18, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Philip Morris Capital Corporation, a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 7.03(d) of the Participation Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages, as the case may be, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement II. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Regulatory Change. Any change after June 18, 1998 in Federal, state or foreign law or regulations or the adoption or making after such date of any interpretation, directive or request applying to a class of financial institutions including any Certificate Holder of or under any Federal, state or foreign law or regulation (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 18, 2021 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of equal or greater value, airworthiness, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Department, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Stipulated Loss Value is to be calculated with reference to any such date; provided that if amounts in respect of Stipulated Loss Value are payable under the Operative Agreements after the Stipulated Loss Determination Date in respect of which such Stipulated Loss Value was determined, the Lessor shall be compensated during the period from the Stipulated Loss Determination Date to such payment date in accordance with the provisions of the Operative Agreements. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, FPO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the seventh anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Termination Value is to be calculated with reference to any such date; provided that if amounts in respect of Termination Value are payable under the Operative Agreements after the Termination Date in respect of which such Termination Value was determined, the Lessor shall be compensated during the period from the Termination Date to such payment date in accordance with the provisions of the Operative Agreements. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 790, REGISTRATION NO. N676FE ============================================================================== TABLE OF CONTENTS PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N676FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N676FE and Manufacturer's serial number 790, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N676FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on July 15, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N676FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. October 13, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N676FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 791, REGISTRATION NO. N677FE ============================================================================== Page ---- TABLE OF CONTENTS PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N677FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N677FE and Manufacturer's serial number 791, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N677FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on August 26, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N677FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. November 24, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N677FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. - ------------------------------------------------------------------------------- TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 792, REGISTRATION NO. N678FE - ------------------------------------------------------------------------------- Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee................ 1 Section 1.02. Declaration of Trust........................................ 2 Section 1.03. Conditions Precedent and Advances by Trustor................ 2 Section 1.04. Prohibited Activity......................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc.............................. 3 Section 2.02. Excepted Payments........................................... 4 Section 2.03. Other Receipts.............................................. 4 Section 2.04. Distributions after Default................................. 4 Section 2.05. Distributions after Release of Lien of Indenture............ 4 Section 2.06. Manner of Making Distributions.............................. 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties.............................. 5 Section 3.02. Limitation on Authority of Owner Trustee.................... 6 Section 3.03. Notice of Default........................................... 6 Section 3.04. Action Upon Instructions.................................... 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee........ 7 Section 3.06. Certain Rights of Owner Trustee............................. 8 Section 3.07. No Representations or Warranties as to Certain Matters...... 10 Section 3.08. Status of Moneys Received................................... 10 Section 3.09. Self-Dealing................................................ 11 Section 3.10. Definition of a Responsible Officer......................... 11 Section 3.11. Resignation or Removal of Owner Trustee..................... 11 Section 3.12. Estate and Rights of Successor Owner Trustee................ 11 Section 3.13. Merger or Consolidation of SSB.............................. 12 Section 3.14. Co-Trustees................................................. 12 Section 3.15. Interpretation of Agreements................................ 13 Section 3.16. Not Acting in Individual Capacity........................... 14 Section 3.17. Tax Returns................................................. 14 Section 3.18. Independent Business........................................ 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination................................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination............ 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification............................................. 17 Section 6.02. Supplements and Amendments.................................. 19 Section 6.03. Nature of Title of Trustor.................................. 19 Section 6.04. Power of Owner Trustee to Convey............................ 19 Section 6.05. Notices..................................................... 20 Section 6.06. Situs of Trust; Applicable Law; Severability................ 21 Section 6.07. Successors and Assigns...................................... 21 Section 6.08. Headings and Table of Contents.............................. 21 Section 6.09. Identification of Trust..................................... 21 Section 6.10. Counterparts................................................ 21 Section 6.11. Trustor Interest............................................ 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N678FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N678FE and Manufacturer's serial number 792, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N678FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 23, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N678FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 22, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N678FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or July 15, 2018, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2017. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 793, REGISTRATION NO. N679FE ============================================================================== TABLE OF CONTENTS ----------------- Page ---- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N679FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N679FE and Manufacturer's serial number 793, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N679FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on October 22, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N679FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. January 20, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N679FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 794, REGISTRATION NO. N680FE ============================================================================== Page ---- TABLE OF CONTENTS PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N680FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N680FE and Manufacturer's serial number 794, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N680FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on May 12, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N680FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. February 10, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N680FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 799, REGISTRATION NO. N681FE ============================================================================== Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N681FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N681FE and Manufacturer's serial number 799, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N681FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on November 20, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N681FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 18, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N681FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. ============================================================================== TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) Dated as of June 15, 1998 between FEDERAL EXPRESS CORPORATION, Trustor and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Owner Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 800, REGISTRATION NO. N682FE ============================================================================== Page ---- TABLE OF CONTENTS ----------------- PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee............. 1 Section 1.02. Declaration of Trust..................................... 2 Section 1.03. Conditions Precedent and Advances by Trustor............. 2 Section 1.04. Prohibited Activity...................................... 2 ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc........................... 3 Section 2.02. Excepted Payments........................................ 4 Section 2.03. Other Receipts........................................... 4 Section 2.04. Distributions after Default.............................. 4 Section 2.05. Distributions after Release of Lien of Indenture......... 4 Section 2.06. Manner of Making Distributions........................... 5 ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties........................... 5 Section 3.02. Limitation on Authority of Owner Trustee................. 6 Section 3.03. Notice of Default........................................ 6 Section 3.04. Action Upon Instructions................................. 6 Section 3.05. Certain Duties and Responsibilities of Owner Trustee..... 7 Section 3.06. Certain Rights of Owner Trustee.......................... 8 Section 3.07. No Representations or Warranties as to Certain Matters... 10 Section 3.08. Status of Moneys Received................................ 10 Section 3.09. Self-Dealing............................................. 11 Section 3.10. Definition of a Responsible Officer...................... 11 Section 3.11. Resignation or Removal of Owner Trustee.................. 11 Section 3.12. Estate and Rights of Successor Owner Trustee............. 11 Section 3.13. Merger or Consolidation of SSB........................... 12 Section 3.14. Co-Trustees.............................................. 12 Section 3.15. Interpretation of Agreements............................. 13 Section 3.16. Not Acting in Individual Capacity........................ 14 Section 3.17. Tax Returns.............................................. 14 Section 3.18. Independent Business..................................... 14 ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination.............................................. 16 Section 4.02. Distribution of Lessor's Estate upon Termination......... 17 ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification.......................................... 17 Section 6.02. Supplements and Amendments............................... 19 Section 6.03. Nature of Title of Trustor............................... 19 Section 6.04. Power of Owner Trustee to Convey......................... 19 Section 6.05. Notices.................................................. 20 Section 6.06. Situs of Trust; Applicable Law; Severability............. 21 Section 6.07. Successors and Assigns................................... 21 Section 6.08. Headings and Table of Contents........................... 21 Section 6.09. Identification of Trust.................................. 21 Section 6.10. Counterparts............................................. 21 Section 6.11. Trustor Interest......................................... 21 Schedule I Definitions TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) TRUST AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) dated as of June 15, 1998 (this "Agreement") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "SSB", and not in its individual capacity but solely as trustee hereunder, the "Owner Trustee"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Trustor"). The capitalized terms used herein, unless otherwise herein defined or the context hereof shall otherwise require, shall have the respective meanings set forth in Schedule I attached hereto. W I T N E S S E T H : WHEREAS, the Trustor desires to create a trust for the purpose of issuing Certificates, the proceeds of which issuance shall initially be held by the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account and released, subject to the proviso to Section 3.02(a) of the Participation Agreement, on the Delivery Date in order to finance a portion of the Purchase Price of the Aircraft, to acquire the Aircraft from AVSA on the Delivery Date, to lease the Aircraft to the Lessee on the Delivery Date and to receive the benefits provided for herein. WHEREAS, SSB is willing to accept the trust as herein provided and to perform its obligations hereunder in its individual capacity or as the Owner Trustee as the case may be. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, SSB and the Trustor agree as follows: ARTICLE 1 THE LESSOR'S ESTATE Section 1.01. Authorization and Direction to Owner Trustee. The Trustor hereby authorizes and directs (or has authorized and directed) the Owner Trustee, not individually but solely as the Owner Trustee hereunder: (a) to execute and deliver, as and when specified in Sections 4.01 and 4.02 of the Participation Agreement, the Participation Agreement and each of the other Operative Agreements to which the Owner Trustee is a party and to enter into and perform the transactions contemplated thereby including, without limitation, accepting title to, and delivery of, the Aircraft from AVSA on the Delivery Date, and taking all appropriate action to cause the Airframe to be registered with the Federal Aviation Administration in the name of the Owner Trustee; (b) to execute and deliver from time to time the Certificates in the manner and subject to the terms and conditions provided in the Participation Agreement and the Indenture; (c) to execute and deliver each other document referred to in the Operative Agreements to which the Owner Trustee is a party or which the Owner Trustee is required to deliver pursuant to the Operative Agreements; (d) subject to the terms of this Agreement, to perform the obligations and duties and, upon instruction of the Trustor, exercise the rights of the Owner Trustee under the Operative Agreements; and (e) to execute and deliver all such other instruments, documents or certificates and take all such other actions in accordance with the directions of the Trustor, as the Trustor may deem necessary or advisable in connection with the Certificate Closing Date and the Delivery Date and the transactions contemplated hereby, the taking of any such action by the Owner Trustee in the presence of the Trustor or its counsel to evidence, conclusively, the direction of the Trustor. Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in its individual capacity, that it will, and in its capacity as the Owner Trustee does, hold the Lessor's Estate upon the trust herein set forth for the use and benefit of the Trustor, subject, however, to the provisions of, and the Lien created by, the Indenture. This Agreement is not intended by the Trustor to create, and the trust created hereby is not intended by the Trustor and the other parties interested herein to constitute a business trust for purposes of the Bankruptcy Code. Section 1.03. Conditions Precedent and Advances by Trustor. The Trustor agrees to make advances to the Owner Trustee in such amounts and at such times as may be necessary to permit the Owner Trustee to satisfy its obligations under Section 3.02 of the Participation Agreement, subject to the conditions set forth therein. The right and obligation of the Owner Trustee to take the actions required by Section 1.01 hereof shall be subject to the condition that the Trustor shall have made the full aggregate amount of the advances required to be made by the Trustor pursuant to Section 3.02(a) of the Participation Agreement. Section 1.04. Prohibited Activity. The Owner Trustee shall not, and the Trustor shall not cause the Owner Trustee to, engage in any activity other than as contemplated or permitted under the Operative Agreements. ARTICLE 2 DISTRIBUTIONS Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the Owner Trustee acknowledge that the proceeds from the sale of the Certificates to be effected on the Certificate Closing Date are to be held by the Indenture Trustee in the Collateral Account in the manner specified in the Indenture for application as provided therein and in Section 3.02 of the Participation Agreement. (b) The Trustor and the Owner Trustee acknowledge that the Lease will be security for the Certificates pursuant to the Indenture which provides that all moneys payable by the Lessee to the Owner Trustee under the Lease (other than Excepted Payments) are to be first paid to the Indenture Trustee while the Lien of the Indenture is in effect, for distribution in accordance with the terms of Article V of the Indenture. Except as otherwise provided in Section 2.04 hereof (and except for amounts received from the Indenture Trustee, which shall be applicable only in accordance with clause (iii) below), the Owner Trustee shall promptly apply each payment of Rent (other than Excepted Payments), Stipulated Loss Value, Termination Value, and any proceeds from the sale, requisition or disposition of the Aircraft received by it as follows: (i) prior to the release of the Lien of the Indenture, each such payment shall be payable directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; provided, that any payments received by the Owner Trustee from (x) the Lessee with respect to SSB's or the Owner Trustee's fees and disbursements under this Agreement, or (y) the Trustor pursuant to Section 6.01 hereof shall not be paid over to the Indenture Trustee but shall be retained by the Owner Trustee and applied toward the purpose for which such payments were made; (ii) after the release of the Lien of the Indenture, any amount remaining after application in full in accordance with paragraph (b)(i) of this Section 2.01 and which represents payments for which provision as to the application thereof is made in any other Operative Agreement shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of such Operative Agreement; and (iii) after application in accordance with paragraphs (i) and (ii) of this Section 2.01(b), or to the extent received from the Indenture Trustee under the terms of the Indenture, the balance, if any, remaining shall be paid to the Trustor. Section 2.02. Excepted Payments. All Excepted Payments at any time received by the Owner Trustee shall be distributed promptly to the applicable Person, and such payment shall not be deemed under any circumstances to be part of the Lessor's Estate. Section 2.03. Other Receipts. Except as otherwise provided in Section 2.04 hereof, any payment received by the Owner Trustee, other than those referred to in Sections 2.01 and 2.02 hereof, shall be payable prior to the release of the Lien of the Indenture directly to the Indenture Trustee (and if any of the same are received by the Owner Trustee shall, upon receipt, be paid over to the Indenture Trustee without deduction, set off or adjustment of any kind) for distribution in accordance with the provisions of Article V of the Indenture; and following such application or release of Lien, any such payment for which provision as to the application thereof is made in the other Operative Agreements shall be applied promptly to the purpose for which such payment shall have been made in accordance with the terms of the other Operative Agreements, and any such payment received by the Owner Trustee for which no provision as to the application thereof is made in the Operative Agreements or in this Article 2 shall, unless the Trustor shall have otherwise instructed the Owner Trustee in writing, be distributed promptly to the Trustor. Section 2.04. Distributions after Default. Subject to the provisions of Section 2.02 hereof, (i) all payments received and amounts realized by the Owner Trustee after an Indenture Event of Default shall have occurred and shall be continuing and after the Certificates shall have become or been declared due and payable pursuant to Section 7.02(b) or 7.02(c) of the Indenture or the Lease shall have been declared in default (including, without limitation, any amounts realized by the Owner Trustee or the Trustor from the exercise of any remedies pursuant to Section 17.01 of the Lease), as well as (ii) all funds then held or thereafter received by the Owner Trustee as part of this Trust Agreement, the Lease or otherwise, shall be distributed to the Indenture Trustee for distribution in accordance with the provisions of Article V of the Indenture. Section 2.05. Distributions after Release of Lien of Indenture. Except as otherwise provided in Sections 2.01, 2.02, 2.03 and 2.04 hereof: (a) all payments received and amounts realized by the Owner Trustee under the Lease or otherwise with respect to the Aircraft or any part thereof (including, without limitation, all payments received pursuant to Section 17.01 of the Lease and amounts realized upon the sale or lease of the Aircraft or any part thereof after the termination of the Lease with respect thereto), to the extent received or realized at any time after the Lien of the Indenture shall have been released pursuant to the terms of the Indenture, and (b) moneys not included in paragraph (a) of this Section 2.05 remaining as part of the Lessor's Estate after payment in full of amounts described in paragraph (a), shall, to the extent required, be retained by the Owner Trustee as reimbursement for all expenses hereunder or under the Lease not theretofore reimbursed under this Agreement, the Lease or otherwise and to which the Owner Trustee is entitled to be reimbursed pursuant to the provisions thereof, and any balance remaining thereafter shall be distributed to the Trustor. Section 2.06. Manner of Making Distributions. The Owner Trustee shall make distributions or cause distributions to be made to (i) the Trustor pursuant to this Article 2 by transferring by wire transfer in immediately available funds the amount to be distributed to such account or accounts of the Trustor as it may designate from time to time by written notice to the Owner Trustee (and the Owner Trustee shall use best efforts to cause such funds to be transferred by wire transfer on the same day as received, but in any case not later than the next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this Article 2 by paying the amount to be distributed to the Indenture Trustee in the manner specified in the Indenture; provided, that the Owner Trustee shall invest overnight, for the benefit of the Trustor, in investments that would be permitted by Article 23 of the Lease (but only to the extent funds are received on or prior to 1:00 P.M. (Eastern Time) and such investments are available and, if such investments are not available to the Owner Trustee in investments which, after consultation with the Trustor, the Trustor shall direct) all funds not transferred by wire transfer on the same day as they were received. Notwithstanding the foregoing but subject always to the provisions of, and the Lien created by, the Indenture, the Owner Trustee will, if so requested by the Trustor by written notice, pay in immediately available funds any and all amounts payable by the Owner Trustee hereunder to the Trustor as directed by the Trustor. ARTICLE 3 THE OWNER TRUSTEE Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner Trustee agrees to perform the same, including without limitation, subject to Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein provided. The Owner Trustee agrees to disburse all monies that it receives under the Operative Agreements in accordance with the terms hereof. The Owner Trustee shall not be answerable or accountable in its individual capacity except as a result of or arising from (a) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (b) any breach by the Owner Trustee of its representations, warranties and covenants given in its individual capacity in this Agreement, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement or its covenants given in its individual capacity in Section 3.05 of the Indenture or elsewhere in the Operative Agreements, (c) the failure to use ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens attributable to it in its individual capacity, and (e) taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB or the Owner Trustee in connection with the transactions contemplated by the Lease, the Indenture and the Operative Agreements including this Agreement. Section 3.02. Limitation on Authority of Owner Trustee. The Owner Trustee shall have no power, right, duty or authority to manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft, Airframe, Engines, any Part thereof or any other property at any time constituting a part of the Lessor's Estate, or otherwise to take or refrain from taking any action under or in connection with the Operative Agreements, except (i) to execute and deliver the Operative Agreements to which it is a party, (ii) to exercise and carry out or cause to be exercised or carried out the rights, duties and obligations of the Owner Trustee hereunder and under the other Operative Agreements as authorized and directed by the Trustor, or (iii) as expressly provided in written instructions from the Trustor given pursuant to Section 3.03 or 3.04 hereof; provided, that nothing in this Section 3.02 shall limit in any manner the obligations of the Owner Trustee hereunder. Section 3.03. Notice of Default. In the event that a Responsible Officer in the Corporate Trust Administration of the Owner Trustee shall have actual knowledge of a Default or an Event of Default, or an Indenture Default or an Indenture Event of Default, the Owner Trustee shall give or cause to be given to the Trustor and the Indenture Trustee prompt notice (in any event within two Business Days of the discovery thereof), in accordance with Article 14 of the Participation Agreement, of such Default, Event of Default, Indenture Default or Indenture Event of Default. Subject to the terms of Section 3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the Owner Trustee shall take such action with respect to such Default, Event of Default, Indenture Default or Indenture Event of Default as shall be specified in written instructions from the Trustor; provided that the Owner Trustee shall have no duty to take any action whatsoever in the absence of instructions from the Trustor. For all purposes of this Agreement and the Lease, in the absence of actual knowledge of a Responsible Officer of the Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a Default, Event of Default, Indenture Default or Indenture Event of Default unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or any Certificate Holder. Section 3.04. Action Upon Instructions. Upon the written instructions at any time and from time to time of the Trustor, the Owner Trustee will take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. Section 3.05. Certain Duties and Responsibilities of Owner Trustee. (a)(i) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth herein, and with the degree of care specified in Section 3.01 hereof, and in accordance with instructions given by the Trustor hereunder, and no implied duties, covenants or obligations shall be read into this Agreement, any such instructions or the Operative Agreements against the Owner Trustee, and the Owner Trustee agrees that it will not manage, control, possess, use, sell, lease, dispose of or otherwise deal with the Aircraft or any part of the Lessor's Estate except as required by the terms of the Operative Agreements, any such instructions and as otherwise provided herein; and (ii) in the absence of bad faith on its part, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement or the other Operative Agreements, but in the case of any such certificates or opinions which by any provisions hereof or thereof are specifically required to be furnished to the Owner Trustee, the Owner Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement or the Operative Agreements. (b) No provision hereof shall require the Owner Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding the foregoing, SSB agrees in its individual capacity that it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder, or under the Participation Agreement or any Operative Agreement. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Owner Trustee shall be subject to the provisions of this Section 3.05, except that in the event of a conflict between this Section 3.05 and Section 3.01 hereof, Section 3.01 hereof shall be controlling. (d) The Owner Trustee will furnish to the Trustor, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee hereunder or under the other Operative Agreements (including those furnished to the Indenture Trustee pursuant to the terms of the Indenture) and not otherwise furnished to the Trustor. (e) Notwithstanding anything herein to the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Trustor within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 2.06 hereof and Article 23 of the Lease. Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof: (a) in the absence of bad faith on its part, the Owner Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction or authorization by the Trustor or any other party to any other Operative Agreement shall be sufficiently evidenced by a request, direction or authorization in writing, delivered to the Owner Trustee, and signed in the name of such party by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary or other duly authorized officer of such party; and any resolution of the Board of Directors or committee thereof of such party shall be sufficiently evidenced by a copy of such resolution certified by the Secretary or an Assistant Secretary of such party, to have been duly adopted and to be in full force and effect on the date of such certification, and delivered to the Owner Trustee; (c) whenever in the administration of this Agreement the Owner Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or under any of the other Operative Agreements, the Owner Trustee (unless other evidence be herein or therein specifically prescribed), absent actual knowledge of a Responsible Officer of the Owner Trustee to the contrary, may rely in good faith upon a certificate in writing, delivered to the Owner Trustee and signed by any of the Chairman of the Board, the President, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary of the Lessee, the Trustor, or the Indenture Trustee and notice of such need for such proof or establishment shall be delivered to the Trustor, who may advise the Owner Trustee in respect of such matter and the Owner Trustee shall act in conformity with such advice; (d) the Owner Trustee may exercise its powers and perform its duties by or through such attorneys, agents and servants as it shall appoint with due care, and it shall be entitled to rely upon the advice of counsel reasonably selected by it with due care and shall be protected by the advice of such counsel in anything done or omitted to be done in accordance with such advice; (e) the Owner Trustee shall not be under any obligation to take any action under this Agreement or under any of the other Operative Agreements at the request or direction of the Trustor unless the Persons making such request or direction shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; nor shall the Owner Trustee be required to take any action deemed to impose on the Owner Trustee any obligation to take any action, if the Owner Trustee shall have been advised by its counsel that such action is unlawful or is contrary to the terms of this Agreement or the other Operative Agreements; (f) the Owner 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 or other paper or document unless a Responsible Officer of the Owner Trustee has actual knowledge that the facts or matters stated therein are false or inaccurate, but the Owner Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Owner Trustee shall determine to make such further inquiry or investigation, it shall be entitled, to the same extent permitted to the Lessor under the Lease, to examine the books and records of the Lessee to reasonably determine whether the Lessee is in compliance with the terms and conditions of the Lease and to examine the Aircraft, Airframe, Engines or any Part thereof personally or by agent or attorney; and (g) without limiting the generality of Section 3.05 hereof, except as otherwise provided in written instructions given to the Owner Trustee by the Trustor or as otherwise provided in the Indenture or the Participation Agreement, the Owner Trustee shall not have any duty (i) to see to any recording or filing of the Lease or of this Agreement or any financing statement or other notice or document relating thereto or contemplated under the Operative Agreements or to see to the maintenance of any such recording or filing (other than FAA reporting requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to see to any insurance on the Aircraft or any part thereof or to effect or maintain any such insurance, whether or not the Lessee shall be in default with respect thereto, other than to forward to the Trustor copies of all certificates, reports and other written information which it receives from the Lessee pursuant to the Lease, (iii) to see to the payment or discharge of any tax, assessment or other governmental charges or any Lien (except any Lessor's Lien attributable to it in its individual capacity) owing with respect to, or assessed or levied against any part of the Lessor's Estate, (iv) to confirm or verify any financial statements or reports of the Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease. Section 3.07. No Representations or Warranties as to Certain Matters. NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB represents and warrants that on the Delivery Date the Owner Trustee shall have received whatever rights, title and interests in, to and under the Aircraft that were conveyed to it by AVSA and SSB represents, warrants and covenants that at all times on and after the Delivery Date the Aircraft shall be free of all Lessor's Liens attributable to it, and that the Owner Trustee shall comply with the last sentence of Section 3.05(b) hereof, or (b) any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement to which the Owner Trustee is a party, or any other document or instrument, or as to the correctness of any statement contained in any thereof, except to the extent that any such representation, warranty or statement is expressly made herein or therein as a representation or warranty by the Owner Trustee or SSB and except that SSB hereby represents and warrants that this Agreement has been, and (assuming the due authorization, execution and delivery of this Agreement by the Trustor) the other Operative Agreements to which the Owner Trustee is a party have been (or at the time of execution and delivery of any such instrument by the Owner Trustee hereunder or pursuant to the terms of the Participation Agreement that such an instrument will be) duly executed and delivered by one of its officers who is or will be, as the case may be, duly authorized to execute and deliver such instruments on behalf of the Owner Trustee and that this Agreement has been duly authorized, executed and delivered by SSB and (assuming due authorization, execution and delivery of this Trust Agreement by the Trustor) constitutes the legal, valid and binding obligation of SSB enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. Section 3.08. Status of Moneys Received. All moneys received by the Owner Trustee under or pursuant to any provision of this Agreement or any Operative Agreement shall constitute trust funds for the purpose for which they were paid or are held, but need not be segregated in any manner from any other moneys except to the extent required by law and subsection (e) of Section 3.18 hereof and may be deposited by the Owner Trustee under such conditions as may be prescribed or permitted by law for trust funds, or may be invested in direct obligations of the United States. Section 3.09. Self-Dealing. The Owner Trustee in its individual capacity, or any corporation in or with which the Owner Trustee may be interested or affiliated, or any officer or director of any such corporation, may have normal commercial relations, and otherwise deal, in the ordinary course of business, with the Lessee or any other corporation having relations with the Lessee to the full extent permitted by law. Section 3.10. Definition of a Responsible Officer. For purposes of this Trust Agreement only, "Responsible Officer" when used with respect to the Owner Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, or any other officer in the Corporate Trust Administration of SSB customarily performing functions similar to those performed by any of the above designated officers. Section 3.11. Resignation or Removal of Owner Trustee. The Owner Trustee or any successor thereof (a) shall resign if required to do so pursuant to Section 7.02(b) of the Participation Agreement and (b) may resign at any time without cause by giving at least 60 days' prior written notice to the Trustor and the Indenture Trustee, such resignation in each case to be effective only upon the appointment of a successor trustee and the acceptance of such appointment by such successor. In addition, the Trustor may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee, such removal to be effective only upon the appointment by the Trustor of a successor Owner Trustee and the acceptance of such appointment by such successor. Upon the giving of notice of resignation or removal of the Owner Trustee, the Trustor may appoint a successor Owner Trustee by an instrument signed by the Trustor. If the Trustor shall not have so appointed a successor Owner Trustee within 30 days after such resignation or removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor or successors shall have been appointed by the Trustor as above provided. Any successor Owner Trustee so appointed by a court shall be superseded by any successor Owner Trustee subsequently appointed by the Trustor. The appointment of any successor Owner Trustee shall be subject to the conditions set forth in Section 11.01 of the Participation Agreement. Section 3.12. Estate and Rights of Successor Owner Trustee. Any successor Owner Trustee, however appointed, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee, an instrument accepting such appointment, and thereupon each successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trust of the predecessor Owner Trustee in the trust hereunder with like effect as if originally named as an Owner Trustee herein, but nevertheless upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, upon the trust herein expressed, all estates, properties, rights, powers, duties, property or moneys then held by such predecessor Owner Trustee upon the trust herein expressed. Upon any such transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall provide the successor Owner Trustee and Trustor an accounting of the Lessor's Estate and the trust hereunder. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Lessor's Estate to be transferred upon the records of the Aeronautics Authority or other registry where the Aircraft may then be registered into the name of the successor Owner Trustee and shall otherwise use its best efforts to comply, or assist the successor Owner Trustee in complying, with the provisions of Section 11.01 of the Participation Agreement. Section 3.13. Merger or Consolidation of SSB. Any corporation into which SSB in its individual capacity may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which SSB shall be a party, or any corporation to which substantially all the business of the Owner Trustee in its individual capacity may be transferred, shall, subject to Section 11.01 of the Participation Agreement, be the Owner Trustee under this Agreement without further act; provided, that such corporation shall not also be the Indenture Trustee. Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the Trustor shall deem it necessary or prudent or desirable in order to conform to legal requirements of any jurisdiction in which any part of the Lessor's Estate may at the time be located, the Trustor and the Owner Trustee jointly shall have the power, and shall execute and deliver all instruments, to appoint one or more Persons approved by the Trustor and the Owner Trustee to act as co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees (except insofar as local law makes it necessary or prudent or desirable for any such co-trustee or separate trustee to act alone), of all or any part of the Lessor's Estate, and to vest in such Person or Persons, in such capacity, such title to the Lessor's Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustor and the Owner Trustee may consider necessary or prudent or desirable. The Owner Trustee shall not be liable for any act or omission of any co-trustee or separate trustee appointed under this Section 3.14. No appointment of, or action by, any co-trustee or separate trustee appointed under this Section 3.14 will relieve the Owner Trustee of any of its obligations under any Operative Agreement or otherwise affect any of the terms of the Indenture or adversely affect the interests of the Indenture Trustee or the Certificate Holders in the Trust Indenture Estate. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Owner Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name subject to the conditions of this Agreement. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Lessor's Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which is provided hereby may be exercised by, any such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder except as otherwise provided hereunder; and (E) the Trustor, at any time, by an instrument in writing may remove any such additional trustee. Section 3.15. Interpretation of Agreements. In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Operative Agreement or any other agreement relating to the transactions contemplated by the Operative Agreements or such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement or any other Operative Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action which the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall request in writing sent in accordance with Article 14 of the Participation Agreement instructions of the Trustor and, to the extent that the Owner Trustee acts in good faith in accordance with any instructions received from the Trustor, shall not be liable to any Person; provided, that in the event that no response is made to the Owner Trustee by the Trustor within 25 Business Days after such request, the Owner Trustee shall not be liable to any Person for acts taken by the Owner Trustee in good faith or for any failure to act, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.16. Not Acting in Individual Capacity. In carrying out the trust hereby created, the Owner Trustee will act solely as trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Agreements to which it is a party; and all Persons, other than the Trustor as provided in this Agreement, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Lessor's Estate for payment or satisfaction thereof, except to the extent provided in the last sentence of Section 3.01 hereof. Section 3.17. Tax Returns. The Owner Trustee shall be responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all moneys under this Agreement or any Operative Agreement. The Trustor shall be responsible for causing to be prepared and filed all income tax returns required to be filed by the Trustor. The Owner Trustee, upon the request of the Trustor, will furnish the Trustor with all such information as may be reasonably required or necessary from the Owner Trustee in connection with the preparation of such tax returns and in connection with any other filing or audit and related litigation obligations. The Owner Trustee shall be responsible for causing to be prepared at the request of the Trustor and at the expense of the Lessee all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy of each such return to the Trustor not more than 60 nor less than 30 days prior to the due date of such return; provided that the Owner Trustee shall have timely received all necessary information to complete and deliver to the Trustor such return. The Trustor, upon request, will furnish the Owner Trustee with all such information as may be required from the Trustor in connection with the preparation of such income tax returns. Section 3.18. Independent Business. The Owner Trustee will conduct its activities such that the Owner Trust is a separate and readily identifiable trust separate from, and independent of, the Trustor and any of its Affiliates (it being understood that the Trustor and its Affiliates may publish financial statements that consolidate those of the Owner Trustee, if to do so is required by any applicable law or accounting principles from time to time in effect) and: (a) it will observe all formalities required under this Agreement necessary to cause the Owner Trust to remain a common law trust separate and distinct from the Trustor and any of its Affiliates; (b) it will maintain each of the assets and liabilities of the Owner Trust separate and distinct from those of the Trustor and any of its Affiliates; (c) it will maintain records, books, accounts, and minutes of the Owner Trust separate from those of the Trustor and any of its Affiliates; (d) it will pay the obligations of the Owner Trust in the ordinary course of business as a common law trust separate from the Trustor and any of its Affiliates; (e) it will keep funds held in the Trust Estate separate and distinct from any funds of the Trustor and any of its Affiliates, and will receive, deposit, withdraw and disburse such funds separately from any funds of the Trustor and any of its Affiliates; (f) it will conduct the activities of the Owner Trust in its own name as trustee of the Owner Trust, and not in the name of the Trustor or any of its Affiliates; (g) it will not agree to pay or become liable for any debt of the Trustor or any of its Affiliates other than as contemplated by the Indenture; (h) it will not induce any third party to rely on the creditworthiness of the Trustor or any of its Affiliates in order that such third party will be induced to contract with the Owner Trust (except insofar as such third party may rely on the fact, if applicable, that the Trustor or its Affiliate is the Lessee); and (i) it will not enter into any transaction between the Owner Trust and the Trustor or any of its Affiliates that is more favorable to the Trustor and its Affiliates than transactions that the Owner Trustee would have been able to enter into at such time on an arm's-length basis with a non-affiliated third party, other than any agreements in effect on the date hereof or any transaction permitted pursuant to the Operative Agreements. ARTICLE 4 TERMINATION OF TRUST Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease and be terminated in any one of the following events, whichever shall first occur: (a) If the Trustor shall by notice in writing to the Owner Trustee revoke and terminate the trust on and as of a date stated in such notice, which date shall not be less than ten nor more than thirty days from the date of mailing such notice, in which case, on the date specified in such notice the trust created and provided for hereby shall cease and terminate; provided, that this Trust shall not be subject to revocation or termination by the Trustor prior to the later of (x) payment in full and discharge of the Certificates and all other indebtedness secured by the Indenture and the release of the Lien of the Indenture and the security interest granted thereby without the consent of the Indenture Trustee and (y) the termination of the Lease; provided, further, that such notice shall be accompanied by the written agreement of the Trustor to assume all of the obligations of the Owner Trustee under the Operative Agreements and all other obligations of the Owner Trustee incurred by it hereunder in its role as the Owner Trustee arising from the revocation or termination of the trust or this Agreement by the Trustor; (b) The sale or other final disposition by the Owner Trustee of all of its interest in all property constituting or included in the Lessor's Estate and, if the Indenture shall then be in effect, the sale or other disposition by the Indenture Trustee of all of its interest in all property constituting or included in the Lessor's Estate, and the final disposition by the Owner Trustee and, if the Indenture shall then be in effect, the Indenture Trustee, of all moneys or other property or proceeds constituting part of the Lessor's Estate in accordance with the terms hereof; or (c) 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement; provided, however, that if the Trust shall be or become valid under applicable law for a period subsequent to 21 years less one day from the death of the last survivor of the descendants of Queen Victoria of England living on the date of this Agreement or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such non-termination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid. In the event of a termination pursuant to this Section 4.01, if the Indenture is still in effect, the Trustor will promptly and duly execute and deliver to the Indenture Trustee such documents and assurances including, without limitation, conveyances, financing statements and continuation statements with respect to financing statements and take such further action as the Indenture Trustee may from time to time reasonably request and furnish in order to protect the rights and remedies created or intended to be created in favor of the Indenture Trustee under the Indenture and to create for the benefit of the Certificate Holders a valid first priority Lien with respect to, and a first and prior perfected security interest in, the Trust Indenture Estate. Section 4.02. Distribution of Lessor's Estate upon Termination. Upon any termination of this Trust pursuant to the provisions of Section 4.01 hereof, the Owner Trustee shall convey the Lessor's Estate (subject to all obligations, if any, of the Owner Trustee then existing under the Operative Agreements to which the Owner Trustee is a party) to such purchaser or purchasers or the Trustor, as the case may be, and for such amount and on such terms as shall be specified in written instructions from the Trustor delivered to the Owner Trustee prior to the date of termination; provided, that in the event such written instructions are not delivered to the Owner Trustee on or before the date of termination, the Owner Trustee shall transfer title to the Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting for all funds which have come into its hands, the Owner Trustee shall be entitled to receipt of any sums due and owing to the Owner Trustee for expenses incurred pursuant hereto as set forth in Section 2.05 hereof. ARTICLE 5 TRANSFER OF BENEFICIAL INTEREST The Initial Owner Participant may, on the Delivery Date (or, if earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial Interest to one or more institutional investors to enable the Owner Trustee to purchase the Aircraft pursuant to Section 3.02 of the Participation Agreement. ARTICLE 6 MISCELLANEOUS Section 6.01. Indemnification. The Trustor and its assigns agrees to reimburse and save SSB, in its individual capacity, harmless against any and all loss, damage, liability, claims, demands, disbursements and expenses, including Taxes (excluding Taxes imposed against SSB upon or with respect to any fees for services rendered in its capacity as Trustee hereunder) and reasonable counsel fees, which are not required to be indemnified by the Lessee pursuant to Section 9.01 of the Participation Agreement and which may be incurred by reason of its being the Owner Trustee or acting hereunder or under the Operative Agreements, but solely by reason thereof and arising out of or relating solely to this Agreement or the other Operative Agreements or the Aircraft or the Rents and other sums payable therefor, or by reason of any occurrence directly relating thereto while so acting, and to secure the payment thereof, SSB, in its individual capacity, shall have a Lien on the Lessor's Estate and the proceeds thereof, including income, prior to any interest therein of the Trustor and their respective assigns (but subject to the rights of the Lessee under the Operative Agreements and subject and subordinate to the Lien of the Indenture), except that SSB shall not have any such Lien (and the Trustor shall have no obligation) in respect of any such loss, damage, liability, claims, demands, disbursements and expenses, including Taxes and counsel fees, arising from or as a result of (A) the Owner Trustee's willful misconduct or gross negligence (in its individual capacity or as trustee), (B) any inaccuracy of any representation of SSB or any breach by SSB of its warranties and covenants given in its individual capacity in this Agreement, Article 5 of the Lease, Sections 7.01(c), 7.02(a) and (b) and 7.04 of the Participation Agreement and its representations and warranties in the Operative Agreements, (C) the failure to use ordinary care in receiving, handling and disbursing funds, (D) Lessor's Liens attributable to it in its individual capacity, (E) Taxes, fees, or other charges on, based on, or measured by, any fees, commissions or compensation received by SSB in connection with the transactions contemplated by the Lease, the Indenture and this Agreement, (F) Taxes excluded from the Lessee's obligation to indemnify SSB pursuant to Section 8.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (iii) or (vi) of Section 8.01(b) of the Participation Agreement) or (G) Expenses excluded from the Lessee's obligation to indemnify SSB pursuant to Section 9.01(b) of the Participation Agreement (disregarding for the purposes of this Section 6.01, subsections (ii), (iv), (vii) and (viii) of Section 9.01(b) of the Participation Agreement to the extent such subsections relate to actions of the Trustor); provided, that, before asserting any right to payment or indemnification hereunder, SSB shall first demand (but need not exhaust its remedies with respect to) its corresponding right to payment or indemnification from the Lessee pursuant to the Participation Agreement. It is further understood that the distribution by the Owner Trustee of all or any part of the Lessor's Estate as provided in Section 4.02 of this Agreement shall not impair the right of SSB to indemnity, payment and reimbursement as herein provided. In the event SSB makes any advances at any time to pay or to provide for the payment of any such loss, damage, liability, claim, demand or expense, then SSB, in its individual capacity, shall be entitled, in addition to reimbursement for the principal of the sum so advanced, to interest on the amount of such advances at the Prime Rate. The provisions of this Section shall continue in force and effect notwithstanding the termination of this Trust or the resignation, inability or incapacity to act or removal of the Owner Trustee. SSB or the Owner Trustee (in its individual capacity or as trustee, as the case may be) agrees that it shall have no right against (except as provided in this Section 6.01) the Trustor or (subject to the provisions of the Indenture) the Trust Indenture Estate for any fee as compensation for its services hereunder. Section 6.02. Supplements and Amendments. At any time and from time to time, only upon the written request of the Trustor (a) SSB and the Trustor shall execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Agreement as specified in such request and (b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the Indenture, enter into or consent to such written amendment or modification of or supplement to any of the Operative Agreements as the Indenture Trustee and any other necessary parties may agree to in writing and as may be specified in such request, or execute and deliver such written waiver of the terms of any of the Operative Agreements as may be agreed to in writing by the Indenture Trustee and as may be specified in such request; provided, that (i) the Owner Trustee shall not execute any such supplement, amendment, waiver or modification without the prior written consent of the Trustor, (ii) if in the reasonable opinion of the Owner Trustee any document required to be executed by it pursuant to this Section adversely affects any right or duty of, or immunity or indemnity in favor of, the Owner Trustee under this Agreement or any other Operative Agreement, the Owner Trustee may in its discretion decline to execute such document, (iii) any amendment or supplement to this Agreement that would adversely affect the rights of the Indenture Trustee or the Holders shall be subject to the prior written consent of the Indenture Trustee and (iv) any amendment or supplement to this Agreement that would adversely affect the rights of the Lessee shall be subject to the prior written consent of the Lessee. It shall not be necessary that any request pursuant to this Section specify the particular form of the proposed document to be executed pursuant to such request, but it shall be sufficient if such request shall indicate the substance thereof. Promptly after the execution by SSB or the Owner Trustee of any document pursuant to this Section, the Owner Trustee shall mail a conformed copy thereof to the Trustor, the Indenture Trustee and the Lessee, but the failure of the Owner Trustee to mail such conformed copies shall not impair or affect the validity of such document. Section 6.03. Nature of Title of Trustor. No Trustor shall have any legal title to any part of the Lessor's Estate. No transfer, by operation of law or otherwise, of the right, title and interest of the Trustor in and to the Lessor's Estate or the trust hereunder shall operate to terminate this Agreement or Lessor's Estate. Section 6.04. Power of Owner Trustee to Convey. Any assignment, sale, transfer or other conveyance by the Owner Trustee of the interest of the Owner Trustee in the Operative Agreements or in the Aircraft or any part thereof pursuant to and in compliance with the terms of this Agreement or the Operative Agreements shall bind the Trustor and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and the Trustor in and to the Operative Agreements or the Aircraft or such part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such assignment, sale, transfer or conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. Section 6.05. Notices. All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid five Business Days after being deposited in the United States mail, and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: If to the Owner Trustee: State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street Goodwin Square Hartford, Connecticut 06103 Attention: Corporate/Muni Administration Facsimile: (860) 244-1889 with a copy to State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department Telephone: (617) 664-5526 Facsimile: (617) 664-5371 If to the Trustor: Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President and Treasurer with a copy to Senior Vice President and General Counsel at: 1980 Nonconnah Boulevard Memphis, Tennessee 38132 Telephone: (901) 395-3388 Facsimile: (901) 395-4758 If to the Indenture Trustee: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Telephone: (801) 246-5630 Facsimile: (801) 246-5053 or as to any of the foregoing parties at such other address as such party may designate by notice duly given in accordance with this Section to the other parties. Section 6.06. Situs of Trust; Applicable Law; Severability. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective; provided, that such remaining provisions do not increase the obligations or liabilities of the Owner Trustee or the Trustor. Section 6.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns, including any successive holder of the Beneficial Interest, but only to the extent the Beneficial Interest has been transferred or assigned in accordance with the limitations of Article 5 of this Agreement. Section 6.08. Headings and Table of Contents. The headings of the Articles and Sections of this Agreement and the Table of Contents are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Section 6.09. Identification of Trust. This Trust may for convenience be referred to as the "Federal Express Corporation Trust No. N682FE." Section 6.10. Counterparts. This instrument may be executed in any number of counterparts or upon separate signature pages bound together in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. Section 6.11. Trustor Interest. The Trustor has only a beneficial interest in any specific property of this Trust. No creditor of the Trustor shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of this Trust (as opposed to the Trustor's beneficial interest in this Trust). IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to be duly executed all as of the date first above written. FEDERAL EXPRESS CORPORATION By: _________________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By: _________________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N682FE and Manufacturer's serial number 800, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N682FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on December 1, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N682FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 30, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N682FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. EX-4.E 10 EXHIBIT 4.e ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48481, REGISTRATION NO. N585FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government....................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to sell to and to lease from the Lessor and the Lessor is willing to purchase from and to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from the Lessee, and the Lessee agrees to sell the Aircraft to the Lessor on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2013 or July 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2016 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, which, in the case of the Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by the Lessee, or to release the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and the Engine Manufacturer are obligated to provide and do provide pursuant to the Modification Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other MD-11 series aircraft and CF6-80C2-D1F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals three). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals three and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals three and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to a McDonnell Douglas MD-11F airframe (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, all three Engines shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on McDonnell Douglas MD-11 airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with three Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of three Engines or engines (as herein authorized under Section 12.02 hereof), all of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other McDonnell Douglas MD-11 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N585FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N585FE and Manufacturer's serial number 48481, together with three General Electric CF6-80C2-D1F engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N585FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on January 15, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N585FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 14, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N585FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N585FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2013 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N585FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N585FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N585FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N585FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described McDonnell Douglas MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) McDonnell Douglas MD-11F Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Three (3) General Electric CF6-80C2-D1F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___, ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President - ------------------------------------------------------------------------------ LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) Dated as of May 1, 1998 Amended and Restated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE MCDONNELL DOUGLAS MD-11F AIRCRAFT SERIAL NO. 48505, REGISTRATION NO. N590FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) DATED AS OF MAY 1, 1998, AS AMENDED AND RESTATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Affirmation of Acceptance under the Lease................... 2 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved].................................................. 2 Section 3.02. Basic Rent.................................................. 2 Section 3.03. Supplemental Rent........................................... 3 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price After the Delivery Date........................................................ 3 Section 3.05. Minimum Basic Rent.......................................... 5 Section 3.06. Payment to Indenture Trustee................................ 5 Section 3.07. Costs and Expenses.......................................... 5 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options............................................. 6 Section 4.02. Purchase Options............................................ 6 Section 4.03. Appraisal Procedures........................................ 9 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties................ 10 Section 5.02. No Modification of Other Warranties......................... 11 Section 5.03. Certain Agreements of the Lessee............................ 11 ARTICLE 6 LIENS Section 6.01. Liens....................................................... 12 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation..................... 13 Section 7.02. Possession and Permitted Transfer and Sublease.............. 15 Section 7.03. Insignia.................................................... 20 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts........................................ 20 Section 8.02. Pooling of Parts............................................ 21 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications...................... 22 Section 9.02. Other Alterations and Modifications......................... 22 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus.......... 24 Section 10.02. Retention of Aircraft by the Lessor........................ 26 Section 10.03. Voluntary Termination as to Engines........................ 27 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................... 28 Section 11.02. Payment of Stipulated Loss Value........................... 28 Section 11.03. Replacement of Airframe and Engines........................ 29 Section 11.04. Event of Loss with Respect to an Engine.................... 32 Section 11.05. Application of Payments from the Government or Others...... 35 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.......................................... 35 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe................................................... 36 Section 11.08. Application of Payments During Existence of Certain Defaults................................................... 36 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft......................................... 37 Section 12.02. Return of Engines.......................................... 38 Section 12.03. Return of Manuals.......................................... 38 Section 12.04. Condition of Aircraft...................................... 38 Section 12.05. Delayed Return of Aircraft................................. 40 Section 12.06. Storage.................................................... 40 Section 12.07. Special Markings........................................... 41 Section 12.08. Lessor's Option to Purchase Parts.......................... 41 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance........................................ 41 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines.................................................... 43 Section 13.03. Application of Insurance Proceeds.......................... 46 Section 13.04. Reports.................................................... 47 Section 13.05. Lessor's Insurance......................................... 47 Section 13.06. Self-Insurance............................................. 48 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection........................................ 48 Section 14.02. No Obligation to Inspect................................... 49 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................... 49 Section 15.02. Citizenship................................................ 49 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default.......................................... 50 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default............................. 52 Section 17.02. Cumulative Remedies........................................ 55 Section 17.03. Waiver..................................................... 55 Section 17.04. Lessor's Right to Perform for Lessee....................... 55 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment............................................ 56 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances......................................... 56 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease............................................ 57 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................... 58 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............... 59 Section 22.02. [Reserved]................................................. 59 Section 22.03. Consent of Lessee to Assignment of Lease as Security....... 59 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................... 59 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease.................................. 61 ARTICLE 25 NOTICES Section 25.01. Notices.................................................... 61 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Heading and Captions............................... 62 Section 26.02. References................................................. 63 Section 26.03. APPLICABLE LAW............................................. 63 Section 26.04. Severability............................................... 63 Section 26.05. No Oral Modification....................................... 63 Section 26.06. Agreement as Chattel Paper................................. 63 Section 26.07. Counterparts............................................... 63 Section 26.08. Public Release of Information.............................. 63 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties...................................... 64 Section 27.02. Section 1110 Compliance.................................... 64 Section 27.03. Finance Lease.............................................. 64 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Schedule VI Description of Original Lease; Description of Aircraft Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, the Lessor and the Lessee have heretofore entered into the Original Lease as supplemented by the Lease Supplement; WHEREAS, the Original Lease with respect to the Aircraft (as such Aircraft is more particularly described in Schedule VI attached hereto) was recorded by the FAA and assigned a Conveyance Number as more particularly described on Schedule VI attached hereto; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the Lessee, the Original Loan Participant, the Owner Participant, the Indenture Trustee and the Lessor desire to refinance, in full, the Original Loan Certificates on the Refunding Date; and WHEREAS, in connection with such refinancing, the Lessee, the Owner Participant, the Lessor and the Indenture Trustee desire that the Original Lease be amended and restated in its entirety as provided herein. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree that the Original Lease be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Affirmation of Acceptance under the Lease. The Lessor, having accepted delivery of the Aircraft from the Lessee on the Delivery Date and having simultaneously leased the Aircraft to the Lessee, and the Lessee, having leased the Aircraft from the Lessor on the Delivery Date, as evidenced by the execution by the Lessor and the Lessee of the initial Lease Supplement (which is incorporated by reference herein), hereby affirm the terms and conditions of the Original Lease as herein amended and restated. This Lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made and ending on the next Rent Payment Date (or, in the case of the last payment of Basic Rent, the end of the Basic Term), and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made and beginning on the preceding Rent Payment Date (or, in the case of the first Rent Payment Date, the Delivery Date). Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, (i) an amount equal to the aggregate amount of any Make-Whole Premium payable under the Indenture (other than any Make-Whole Premium payable in connection with an Indenture Event of Default that is not and does not arise out of a Lease Event of Default) and (ii) an amount equal to the excess of interest at the Past Due Rate on the principal of the Certificates in connection with an acceleration of the Certificates pursuant to Section 7.02 of the Indenture following an Indenture Event of Default attributable to an Event of Default over interest payable by the Lessee at the Past Due Rate on Basic Rent. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price After the Delivery Date. The percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value referred to in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward) subject to the minimum value established by Sections 3.05 and 4.02(a)(F) hereof and by the definitions of Stipulated Loss Value and Termination Value to reflect (i) any costs and expenses paid by the Lessor or the Owner Participant pursuant to Section 10.01 of the Participation Agreement being greater or less than the Estimated Expense Amount, (ii) any Refinancing pursuant to Section 15.01 of the Participation Agreement, (iii) any reoptimization pursuant to Section 15.02 of the Participation Agreement or (iv) payments pursuant to Section 5 of the Tax Indemnity Agreement by an adjustment of Basic Rent. Each such adjustment pursuant to clause (i), (ii) or (iv) of the first sentence of this Section 3.04 shall maintain the Owner's Economic Return (and, while maintaining such Owner's Economic Return, minimize the aggregate Net Present Value of Rents to the Lessee) and shall not cause the EBO Price to be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value of the Aircraft at the time of exercise of the purchase option under Section 4.02(a)(F) hereof. In the event of an adjustment pursuant to clause (iii) of the first sentence of this Section 3.04, the Owner Participant may recalculate Basic Rent as set forth in Schedule II hereto in order to maintain the Owner's Economic Return and, subject to the provisions of Section 15.02 of the Participation Agreement, recalculate the amounts set forth in Schedule I to the Indenture, the Stipulated Loss Value percentages set forth in Schedule III hereto and the Termination Value percentages set forth in Schedule IV hereto and the EBO Price in a manner consistent with such recalculation of Basic Rent; provided that any such recalculations may not (A) increase the Net Present Value of Rents to the Lessee, (B) increase as of any date the sum of (1) the Net Present Value of Rents to the Lessee payable through such date plus (2) the present value of the Stipulated Loss Value or the Termination Value or the EBO Price as of such date, in each case discounted at the same discount rate used in the definition of "Net Present Value of Rents", beyond such net present values prior to such adjustment, or (C) otherwise result in any adverse impact (including tax consequences) to the Lessee for which the Owner Participant has not agreed to indemnify the Lessee on terms reasonably acceptable to the Lessee. The Owner Participant shall promptly notify the Lessee and the Lessor and the Lessee shall promptly notify the Owner Participant and the Lessor of the need for any such adjustment. As promptly as feasible after any such notification, the Lessor shall furnish the Lessee with a notice setting forth the amount of any such adjustments together with the calculations upon which the adjustments are based; provided, however, that the Lessor and the Owner Participant shall not be required to disclose to the Lessee in such notice any confidential or proprietary information (including methodology or assumptions) relating to such calculations. At the request and, subject to the next succeeding sentence, expense of the Lessee, the accuracy of the calculation of such adjustments and the consistency of the calculation with the calculation used to determine Basic Rent, Stipulated Loss Values, Termination Values and the EBO Price shall be verified first, by First Chicago Leasing Corporation or such other financial advisor chosen by the Lessee (it being agreed that the Owner Participant shall not be obligated to provide to First Chicago Leasing Corporation or such other financial advisor any information reasonably deemed confidential by the Owner Participant) and second, if such adjustments are still believed to be in error and are not reconciled with the Owner Participant within fifteen (15) Business Days, by a firm of nationally recognized independent public accountants selected by the Lessee and reasonably acceptable to the Owner Participant and, in order to enable them to verify such adjustments, the Owner Participant shall make available to such accountants (for their own confidential use and not to be disclosed to the Lessee or any other Person and subject to the execution of a confidentiality agreement reasonably satisfactory to the Owner Participant) all information reasonably necessary for such verification, including the name of the lease analysis program used by the Owner Participant to calculate such adjustments. The Lessee will pay the reasonable costs and expenses of the verification process under this Section 3.04 unless as a result of such verification process by the independent public accountants Basic Rent is adjusted and such adjustment causes the Net Present Value of Rents to decline by 10 or more basis points (in which event the Owner Participant shall pay the reasonable costs and expenses of such verification process). The Lessor and the Lessee shall execute and deliver an amendment to this Lease to reflect each adjustment under this Section 3.04. All adjustments under this Section 3.04 shall be in compliance with the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715 and Sections 4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B. 752 and shall be structured so as to not cause the Lease to be a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code. Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct within the United States by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may on not more than two occasions, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term, extend the Term for a Fixed Renewal Term of one (1) year commencing on the expiration of the Basic Term. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In no event shall the term of any Fixed Renewal Term extend beyond the second anniversary of the last day of the Basic Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one year thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Lessee shall pay the Fair Market Rental during any Fair Market Renewal Term. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2011 or January 15, 2014, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value of the Aircraft on such date; or (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value of the Aircraft on such date; or (F) to terminate this Lease on January 15, 2016 and purchase the Aircraft on such Rent Payment Date for an amount (the "EBO Price") equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, which, in the case of the Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by the Lessee, or to release the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and the Engine Manufacturer are obligated to provide and do provide pursuant to the Modification Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve (i) any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein, (ii) any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee, any Holder and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or (iii) any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) cause the Aircraft to remain at all times duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other MD-11 series aircraft and CF6-80C2-D1F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable law, rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, treaty, law, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, treaty, law, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier certificated under Section 41102(a) of the Transportation Code or any successor provision or (y) any "foreign air carrier" (as such term is defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code and which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administrated pursuant to Executive Order No. 12056, as amended (the "CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Air Mobility Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to the Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof, other than clauses (d) and (f) thereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens except for Liens permitted by Section 6.01 hereof (other than clauses (d) and (f) thereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof (other than clauses (d) and (f) thereof)); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof (other than clauses (d) and (f) thereof)) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 120 days' prior written notice (which notice shall state the Proposed Termination Date) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than three occasions have the right to revoke its notice of termination not less than fifteen (15) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals three). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals three and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest (evaluated on an After-Tax Basis, taking into account FSC Benefits (as defined in the Tax Indemnity Agreement) actually available, if any) cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full to the Lessor of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium, on or prior to the Proposed Termination Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals three and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the fifteenth Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to a McDonnell Douglas MD-11 series airframe (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b) (provided that if there are any Liens of the type described in Section 6.01(b) hereof, such Liens are subordinate to the Lien of the Indenture), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on McDonnell Douglas MD-11 airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) comply with the provisions of Section 9.08 of the Indenture; (vi) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (vii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (viii) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (ix) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with three Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. If the Lessor furnishes to the Lessee a written request regarding the return of the Aircraft so as to enable the Lessor or the Owner Participant to realize "foreign trade income" as defined in Section 923(b) of the Code or other favorable tax treatment for Illinois state income tax purposes from the sale or release of the Aircraft, the Lessee will comply with such proposal to the extent the Lessee can do so without incurring any cost or expense not indemnified against by the Lessor in a manner reasonably acceptable to the Lessee and to the extent such compliance would not otherwise interfere with the Lessee's conduct of its business. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of three Engines or engines (as herein authorized under Section 12.02 hereof), all of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's maintenance program approved by the Aeronautics Authority, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other McDonnell Douglas MD-11 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than the Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six months' notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained in the same manner and covering the same risks as is from time to time applicable to other aircraft owned or operated by the Lessee on the ground and not in operation. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, the Owner Participant, the Owner Participant Guarantor, each Liquidity Provider and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, Lessor or Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain primary obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. Each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value, Termination Value or Make-Whole Premium, as the case may be, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of this Lease, the Trust Agreement and the Indenture, the Lessee will cause each of them to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant and the Indenture Trustee, that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement and the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Heading and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N590FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreements. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 27, 2020, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Chicago, Illinois, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N590FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing on or prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. May 27, 1998. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Engine. Each of the three General Electric CF6-80C2-D1F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of May 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(ix) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. If an Event of Loss described in any of clauses (i) (A), (iii), (iv) or (v) above shall occur, Lessor may elect, within 30 days following the date upon which such Event of Loss is deemed to have occurred, to waive such Event of Loss and the consequences thereof. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. FSC. Global Capital Solutions Ltd., a Barbados corporation. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes or Expenses imposed against the Indenture Trustee which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of May 1, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Modification Agreement, any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity or the Owner Participant) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. McDonnell Douglas Corporation, a Maryland corporation. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Modification Agreement. The Aircraft Modification Agreement dated as of December 1, 1995 between the Lessee and the Manufacturer providing for the refurbishing and reconfiguration of the Aircraft including any warranties relating thereto, but only to the extent that the foregoing relates to the Aircraft, to the extent assigned to the Owner Trustee pursuant to the Warranty Bill of Sale. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than (i) a citizen or resident of the United States, as defined in Section 7701(a)(30) of the Code, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or therein, or (iii) any estate or trust that is subject to United States federal income taxation regardless of the source of its income. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N590FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on May 27, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136036. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE), dated May 27, 1998 attached thereto was recorded as one instrument by the FAA on June 1, 1998 and assigned Conveyance Number X136037. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on May 27, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Lessee and the Owner Participant as it was originally executed on May 27, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on May 27, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Bankmont Financial Corp., a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Article 5 of the Trust Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's (i) nominal after-tax yield and aggregate after-tax cash flow during the Basic Term and (ii) nominal after-tax yield and aggregate after-tax cash flow assumed to be realized through the date on which the option under Section 4.02(a)(F) of the Lease may be exercised, in each case, utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement thereof in accordance with the Lease, which may be removed therefrom. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Price. Has the meaning specified in Ancillary Agreement I. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 27, 2020 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-D1F engine (or an engine of the same or another manufacturer) of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-D1F engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, with respect to the Owner Participant, the president or any vice president with direct responsibility for the transactions contemplated by the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease under the heading "Stipulated Loss Value Date." Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after July 15, 2006 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2011 and January 15, 2014, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the fifth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2016. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ---------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the fifth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant has notified the Lessee that it will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment shall occur at any time on or after the fifth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provides the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable on the Business Day preceding the 15th day prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. SCHEDULE VI DESCRIPTION OF ORIGINAL LEASE Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between Federal Express Corporation, as lessee and State Street Bank and Trust Company of Connecticut, National Association, as owner trustee under Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998 between BMO Leasing (U.S.), Inc., as Owner Participant and State Street Bank and Trust Company of Connecticut, National Association, recorded by the Federal Aviation Administration on June 1, 1998 and assigned Conveyance No. X136037, as supplemented by the following described instrument: FAA FAA Date of Recording Conveyance Instrument Instrument Date Number - ---------- ---------- --------- ---------- Lease Supplement No. 1 (Federal Express Corporation Trust No. N590FE) 05/27/98 06/01/98 X136037 DESCRIPTION OF AIRCRAFT One (1) McDonnell Douglas MD-11F aircraft bearing manufacturer's serial number 48505 and U.S. Registration No. N590FE and three (3) General Electric CF6-80C2-D1F aircraft engines bearing manufacturer's serial numbers 702-819, 702-315 and 702-302 Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N590FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N590FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described McDonnell Douglas MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) McDonnell Douglas MD-11F Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Three (3) General Electric CF6-80C2-D1F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___, ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: __________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______, ____. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: __________________________________________ Name: Greg A. Hawley Title: Vice President - ------------------------------------------------------------------------------ LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 48791, REGISTRATION NO. N620FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price........................ 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.................................. 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe.............................. 34 Section 11.08. Application of Payments During Existence of Certain Defaults............................................... 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................ 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to sell to and to lease from the Lessor and the Lessor is willing to purchase from and to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from the Lessee, and the Lessee agrees to sell the Aircraft to the Lessor on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either January 15, 2015 or January 15, 2020, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, which, in the case of the Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by the Lessee, or to release the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other MD-11 series aircraft and 4462 series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals three). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals three and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals three and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to a McDonnell Douglas MD-11F airframe (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, all three Engines shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on McDonnell Douglas MD-11 airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with three Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of three Engines or engines (as herein authorized under Section 12.02 hereof), all of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other McDonnell Douglas MD-11 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of June 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N620FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N620FE and Manufacturer's serial number 48791, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N620FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N620FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. June 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N620FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N620FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N620FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N620FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N620FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described McDonnell Douglas MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) McDonnell Douglas MD-11F Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Three (3) Pratt & Whitney 4462 Engines bearing, respectively, Manufacturer's Serial Nos. ___-___, ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President - ------------------------------------------------------------------------------ LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 48792, REGISTRATION NO. N621FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price........................ 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.................................. 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe.............................. 34 Section 11.08. Application of Payments During Existence of Certain Defaults............................................... 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance............................. 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines............................................ 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to sell to and to lease from the Lessor and the Lessor is willing to purchase from and to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from the Lessee, and the Lessee agrees to sell the Aircraft to the Lessor on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2015 or January 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, which, in the case of the Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by the Lessee, or to release the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other MD-11 series aircraft and 4462 series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals three). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals three and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals three and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to a McDonnell Douglas MD-11F airframe (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, all three Engines shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on McDonnell Douglas MD-11 airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with three Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of three Engines or engines (as herein authorized under Section 12.02 hereof), all of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other McDonnell Douglas MD-11 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of June 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N621FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N621FE and Manufacturer's serial number 48792, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N621FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N621FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N621FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N621FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2015 or January 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N621FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N621FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N621FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N621FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described McDonnell Douglas MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) McDonnell Douglas MD-11F Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Three (3) Pratt & Whitney 4462 Engines bearing, respectively, Manufacturer's Serial Nos. ___-___, ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President - ------------------------------------------------------------------------------ LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 48794, REGISTRATION NO. N623FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price........................ 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.................................. 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe.............................. 34 Section 11.08. Application of Payments During Existence of Certain Defaults....................................... 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance............................. 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines............................................ 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to sell to and to lease from the Lessor and the Lessor is willing to purchase from and to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from the Lessee, and the Lessee agrees to sell the Aircraft to the Lessor on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2016 or January 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, which, in the case of the Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by the Lessee, or to release the Lessee, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other MD-11 series aircraft and 4462 series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals three). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals three and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals three and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to a McDonnell Douglas MD-11F airframe (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, all three Engines shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on McDonnell Douglas MD-11 airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with three Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of three Engines or engines (as herein authorized under Section 12.02 hereof), all of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other McDonnell Douglas MD-11 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of June 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N623FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Aircraft. The Airframe to be sold by the Lessee to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with three Engines (whether each is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the McDonnell Douglas MD-11F airframe bearing FAA Registration Number N623FE and Manufacturer's serial number 48794, together with three Pratt & Whitney 4462 engines. Airframe. The McDonnell Douglas MD-11F aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N623FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on June 15, 2024, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Bills of Sale. Collectively, the FAA Bill of Sale and the Warranty Bill of Sale. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N623FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. September 13, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by the Lessee to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the three Pratt & Whitney 4462 engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, all Engines then leased to the Lessee pursuant to the Lease. Engine Consent and Agreement. The Engine Consent and Agreement dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. Pratt & Whitney, a Connecticut corporation. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all McDonnell Douglas MD-11 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one McDonnell Douglas MD-11 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by the Lessee in favor of the Owner Trustee and to be dated the Delivery Date. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by the Lessee to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N623FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, any Ancillary Agreement, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit F to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, the Bills of Sale, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N623FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Purchase Agreement No. A00431-B dated as of March 17, 1998 between the Manufacturer and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N620FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE and N621FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A Pratt & Whitney 4462 engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a Pratt & Whitney 4462 engine, such replacement engine must then be commonly used in the commercial aviation industry on McDonnell Douglas MD-11 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N623FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by the Lessee, as seller in favor of the Owner Trustee, as buyer, and to be dated the Delivery Date. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N623FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N623FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N623FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described McDonnell Douglas MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) McDonnell Douglas MD-11F Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Three (3) Pratt & Whitney 4462 Engines bearing, respectively, Manufacturer's Serial Nos. ___-___, ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) Dated as of June 1, 1998 Amended and Restated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 789, REGISTRATION NO. N675FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) DATED AS OF JUNE 1, 1998, AS AMENDED AND RESTATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Affirmation of Acceptance under the Lease................ 2 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 3 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and Termination Value After the Delivery Date..................................................... 3 Section 3.05. Minimum Basic Rent....................................... 5 Section 3.06. Payment to Indenture Trustee............................. 5 Section 3.07. Costs and Expenses....................................... 5 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 5 Section 4.02. Purchase Options......................................... 6 Section 4.03. Appraisal Procedures..................................... 8 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 10 Section 5.02. No Modification of Other Warranties...................... 11 Section 5.03. Certain Agreements of the Lessee......................... 11 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 11 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 12 Section 7.02. Possession and Permitted Transfer and Sublease........... 15 Section 7.03. Insignia................................................. 19 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 20 Section 8.02. Pooling of Parts......................................... 21 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 21 Section 9.02. Other Alterations and Modifications...................... 22 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 23 Section 10.02. Retention of Aircraft by the Lessor..................... 25 Section 10.03. Voluntary Termination as to Engines..................... 27 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 27 Section 11.02. Payment of Stipulated Loss Value........................ 27 Section 11.03. Replacement of Airframe and Engines..................... 28 Section 11.04. Event of Loss with Respect to an Engine................. 31 Section 11.05. Application of Payments from the Government or Others... 34 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.............................................. 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 35 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 37 Section 12.05. [Reserved].............................................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 43 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 45 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 46 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 46 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 47 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 53 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 54 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 56 Section 22.02. [Reserved].............................................. 56 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 56 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 58 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Heading and Captions............................ 60 Section 26.02. References.............................................. 60 Section 26.03. APPLICABLE LAW.......................................... 60 Section 26.04. Severability............................................ 60 Section 26.05. No Oral Modification.................................... 60 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 61 Section 27.02. Section 1110 Compliance................................. 61 Section 27.03. Finance Lease........................................... 61 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Schedule VI Description of Original Lease; Description of Aircraft Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, the Lessor and the Lessee have heretofore entered into the Original Lease as supplemented by the Lease Supplement; WHEREAS, the Original Lease with respect to the Aircraft (as such Aircraft is more particularly described in Schedule VI attached hereto) was recorded by the FAA and assigned a Conveyance Number as more particularly described on Schedule VI attached hereto; WHEREAS, pursuant to Article 15 of the Original Participation Agreement, the Lessee, the Original Loan Participant, the Owner Participant, the Indenture Trustee and the Lessor desire to refinance, in full, the Original Loan Certificates on the Refunding Date; and WHEREAS, in connection with such refinancing, the Lessee, the Owner Participant, the Lessor and the Indenture Trustee desire that the Original Lease be amended and restated in its entirety as provided herein. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree that the Original Lease be and the same is hereby amended and restated in its entirety as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Affirmation of Acceptance under the Lease. The Lessor, having accepted delivery of the Aircraft from AVSA on the Delivery Date and having simultaneously leased the Aircraft to the Lessee, and the Lessee, having leased the Aircraft from the Lessor on the Delivery Date, as evidenced by the execution by the Lessor and the Lessee of the initial Lease Supplement (which is incorporated by reference herein), hereby affirm the terms and conditions of the Original Lease as herein amended and restated. This Lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, (i) an amount equal to the aggregate amount of any Make-Whole Premium payable under the Indenture (other than any Make-Whole Premium payable in connection with an Indenture Event of Default that is not and does not arise out of a Lease Event of Default) and (ii) an amount equal to the excess of interest at the Past Due Rate on the principal of the Certificates in connection with an acceleration of the Certificates pursuant to Section 7.02 of the Indenture following an Indenture Event of Default attributable to an Event of Default over interest payable by the Lessee at the Past Due Rate on Basic Rent. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and Termination Value After the Delivery Date. The percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value referred to in Schedule III and Schedule IV hereto, respectively, shall be adjusted (upward or downward) subject to the minimum value established by Section 3.05 hereof and the definitions of Stipulated Loss Value and Termination Value to reflect (i) any costs and expenses paid by the Lessor or the Owner Participant pursuant to Section 10.01 of the Participation Agreement being greater or less than the Estimated Expense Amount, (ii) any Refinancing pursuant to Section 15.01 of the Participation Agreement, (iii) any reoptimization pursuant to Section 15.02(a) of the Participation Agreement or (iv) payments pursuant to Section 5 of the Tax Indemnity Agreement by an adjustment of Basic Rent. Each such adjustment pursuant to clause (i), (ii) or (iv) of the first sentence of this Section 3.04 shall maintain the Owner's Economic Return (and, while maintaining such Owner's Economic Return, minimize the aggregate Net Present Value of Rents to the Lessee). In the event of an adjustment pursuant to clause (iii) of the first sentence of this Section 3.04, the Owner Participant may recalculate Basic Rent as set forth in Schedule II hereto in order to maintain to the extent feasible the Owner's Economic Return and, subject to the provisions of Section 15.02 of the Participation Agreement, recalculate the amounts set forth in Schedule I to the Indenture, the Stipulated Loss Value percentages set forth in Schedule III hereto and the Termination Value percentages set forth in Schedule IV hereto in a manner consistent with such recalculation of Basic Rent; provided that any such recalculations as a result of an adjustment pursuant to such clause (iii) of the first sentence of this Section 3.04 may not (A) increase the Net Present Value of Rents to the Lessee, (B) increase as of any date the sum of (1) the Net Present Value of Rents to the Lessee payable through such date plus (2) the present value of the Stipulated Loss Value or the Termination Value as of such date, in each case discounted at the Debt Rate, beyond such net present values prior to such adjustment, or (C) otherwise result in any adverse impact (including tax consequences) to the Lessee for which the Owner Participant has not agreed to indemnify the Lessee on terms reasonably acceptable to the Lessee. The Owner Participant shall promptly notify the Lessee and the Lessor and the Lessee shall promptly notify the Owner Participant and the Lessor of the need for any such adjustment pursuant to this Section 3.04. As promptly as feasible after any such notification, the Lessor shall furnish the Lessee with a notice setting forth the amount of any such adjustments together with the calculations upon which the adjustments are based; provided, however, that the Lessor and the Owner Participant shall not be required to disclose to the Lessee in such notice any confidential or proprietary information (including methodology or assumptions) relating to such calculations. At the request and, subject to the next succeeding sentence, expense of the Lessee, the accuracy of the calculation of such adjustments and the consistency of the calculation with the calculation used to determine Basic Rent, Stipulated Loss Values and Termination Values shall be verified first, by First Chicago Leasing Corporation or such other financial advisor chosen by the Lessee and second, if such adjustments are still believed to be in error and are not reconciled with the Owner Participant within fifteen (15) Business Days, by a firm of nationally recognized independent public accountants selected by the Lessee and reasonably acceptable to the Owner Participant and, in order to enable them to verify such adjustments, the Owner Participant shall make available to such accountants (for their own confidential use and not to be disclosed to the Lessee or any other Person and subject to the execution of a confidentiality agreement reasonably satisfactory to the Owner Participant) all information reasonably necessary for such verification, including the name of the lease analysis program used by the Owner Participant to calculate such adjustments. The Lessee will pay the reasonable costs and expenses of the verification process under this Section 3.04 unless as a result of such verification process by the independent public accountants Basic Rent is adjusted and such adjustment causes the Net Present Value of Rents, to decline by 10 or more basis points (in which event the Owner Participant shall pay the reasonable costs and expenses of such verification process). The Lessor and the Lessee shall execute and deliver an amendment to this Lease to reflect each adjustment under this Section 3.04. All adjustments under this Section 3.04 shall be in compliance with the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715 and Sections 4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B. 752 and shall be structured so as to not cause the Lease to be a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code. Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct within the United States by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or any Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B), (C) or (F) hereof, as applicable. Provided that (i) no Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 90 days prior to the end of the Basic Term or any Fixed Renewal Term, extend the Term for one Fixed Renewal Term of three years commencing on the expiration of the Basic Term and one additional Fixed Renewal Term of one year commencing on the expiration of the preceding Fixed Renewal Term. The Lessee shall pay the Fixed Renewal Rent during the Fixed Renewal Term. In addition, provided that (i) no Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, on no more than two occasions, by irrevocable written notice delivered to the Lessor not less than 90 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than four years following the Basic Term or the Fixed Renewal Term. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the greater of the Stipulated Loss Value on the last day of the Basic Term and the Fair Market Value of the Aircraft as of the commencement of such Renewal Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) or (F) below or, if a Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, and (iii) no Event of Default shall have occurred and be continuing on the applicable Termination Date, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 180 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on (and only on) July 15, 2016, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount in immediately available funds equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 15 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not less than 90 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount in immediately available funds equal to the Fair Market Value thereof on such date; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the last day of the Basic Term; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not less than 90 days prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price in immediately available funds equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount in immediately available funds not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value of the Aircraft; or (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount in immediately available funds not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value of the Aircraft; or (F) by irrevocable written notice delivered to the Lessor and the Owner Participant not less than 90 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for the amount in immediately available funds specified in the Ancillary Agreement II (the "FPO Price") which is not less than the estimate set forth in the Appraisal of the Fair Market Value of the Aircraft at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 180 and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D) or 4.02(a)(E) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (to the extent payable in arrears but not to the extent payable in advance), the applicable purchase price together with any other amounts past due hereunder or due on the applicable Termination Date and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee; provided that the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve (i) any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein, (ii) any material risk of civil liabilities or (iii) any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) cause the Aircraft to remain at all times duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests the Lessee agrees are indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the commencement of such sublease, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) after December 31, 2005 sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, or (C) after December 31, 2005 sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains normal diplomatic relations with the country in which such Air Carrier is principally based and domiciled and provided further that such country shall not then be experiencing war. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below and except that, in the case of subparagraph (iv), possession of the Aircraft may only be transferred at the direction of the Lessee) and (z) such sublease shall expire not later than the expiration of the Basic Term or any Renewal Term then in effect hereunder. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) above: (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA or at least comparable to those, taken as a whole, required by the central civil aviation authority of any of the United Kingdom, France, Canada, Japan or Germany; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might reasonably have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense), (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) or of the sublessee, prevent the return of the Aircraft in accordance with the terms of this Lease and (H) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (III) duties and tariffs, if applicable, shall be paid for by the Lessee; and (IV) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required, or reasonably requested by the Lessor, to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains normal diplomatic relations (and which is not experiencing war) or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains normal diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of or any Engine shall be effected and that throughout the period that any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administrated pursuant to Executive Order No. 12056, as amended (the "CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Air Mobility Command of the United States Air Force to whom notices must be given in respect of the Aircraft; (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessor shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease and the other Operative Agreements to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease and, prior to execution and delivery of any sublease deliver to the Lessor all other documents (including all insurance certificates evidencing compliance with this Lease) required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term. Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof, other than clauses (d) and (f) thereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens except for Liens permitted by Section 6.01 hereof (other than clauses (d) and (f) thereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof (other than clauses (d) and (f) thereof)); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof (other than clauses (d) and (f) thereof)) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests the Lessee agrees are indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts in its usual course of maintenance, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each Part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on no more than 180 days' and at least 90 days' irrevocable (except as provided herein) prior written notice (which notice shall state the Proposed Termination Date) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall have the right on one occasion to revoke its notice of termination no later than the Business Day prior to the date 15 days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full to the Lessor of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date to the extent payable in arrears but not to the extent payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for in Section 10.01(c) hereof. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than sixty (60) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date to the extent payable in arrears but not to the extent payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make- Whole Premium, on or prior to the Proposed Termination Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the fifteenth day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss or if later, the 15th day following the end of the 60-day election period referred to in Section 11.01 hereof and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next succeeding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date), plus (B) any and all Basic Rent due and payable on the relevant Stipulated Loss Value Determination Date to the extent payable in arrears but not to the extent payable in advance, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts (including Basic Rent due and payable with respect to Rent Payment Dates occurring prior to such Stipulated Loss Value Determination Date and unpaid) due and payable by the Lessee hereunder or owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee; provided that in no event shall the Holders not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof and provided that the Lessee shall have reimbursed the reasonable out-of-pocket costs and expenses (including, without limitation, reasonable counsel fees and disbursements) of the Lessor, the Owner Participant, the Indenture Trustee and the Holders (to the extent of the reasonable fees and expenses of one legal counsel in each relevant jurisdiction representing all of the Holders) in connection with the matters contemplated by this Section 11.03, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequence not otherwise indemnified for to its reasonable satisfaction as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values except as may be provided pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b) (provided that if there are any Liens of the type described in Section 6.01(b) hereof, such Liens are subordinate to the Lien of the Indenture), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Indenture Trustee with an original of, and the Lessor with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) comply with the provisions of Section 9.08 of the Indenture; (vi) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (vii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (viii) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (ix) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in repairing or maintaining the Aircraft by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee. All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessee (and reasonably acceptable to the Owner Participant), or if such termination is pursuant to Article 17 hereof, selected by the Lessor in its reasonable discretion, within or, if the Aircraft is then registered outside the United States, outside of the continental United States (on the Lessee's route structure as in effect on the return date and provided that the Lessee shall pay any incremental expenses incurred in connection with a redelivery outside the United States) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessee will give the Lessor at least 30 days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals, certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records required to be maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and the Airframe and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program (or other permitted maintenance program). If, at the time of return of the Aircraft, the Engines or engines are not being maintained under an on-condition maintenance program, then the average number of hours of operation on such Engines or engines remaining until the next scheduled engine heavy maintenance visit under the Lessee's FAA-approved maintenance program (or other permitted maintenance program) shall be at least 25% of the allowable hours between engine heavy maintenance visits. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's FAA-approved maintenance program as if the Term were not ending. Section 12.05. [Reserved]. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 45 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value (taking into account the provisions of this Lease) determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, (i) comprehensive airline liability insurance including, without limitation, passenger legal and bodily injury liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and allied perils liability but excluding war risk insurance (except as required under the second sentence of this Section 13.01(a)), with such retentions (subject to the limitations set forth in Section 13.06 hereof) and on such terms and conditions (including coverage for cost of claims) as the Lessee customarily maintains with respect to aircraft and engines of the same type and model which comprise the fleet of the Lessee, and (ii) such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all such insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and all risk-ground insurance for the Aircraft on the ground is maintained in the same manner and covering the same risks as is from time to time applicable to other aircraft owned or operated by the Lessee of the same type and model on the ground and not in operation. The Lessee will be required to maintain war risk insurance only if the Aircraft is operated in a war zone or a recognized area of armed hostilities. All insurance required by this Section 13.01(a) shall be maintained with insurers of recognized reputation and responsibility. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, the Owner Participant, the Owner Participant Guarantor, each Liquidity Provider and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by the Lessee or any sublessee or any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized reputation and responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except with respect to the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, and upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain (i) allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except with respect to the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance and (ii) war risk insurance only if the Aircraft is operated in a war zone or a recognized area of armed hostilities), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the Aircraft from time to time. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, (except as otherwise provided under Section 13.03 hereof when an Event of Loss or a Payment Default, Bankruptcy Default or Event of Default has occurred and is continuing), that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall in the aggregate upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order to pay for repairs or replacement property; (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee. (c) Application of Payments During Existence of Certain Defaults. Any amount referred to in this Article 13 which is payable to or retainable by the Lessee shall not be paid to or retained by the Lessee if at the time of such payment or retention a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be held by or paid over to the Indenture Trustee (unless the Indenture has been discharged in which case such amount shall be paid to the Lessor) to be held in accordance with Article 23 hereof, as security for the obligations of the Lessee under this Lease and, if an Event of Default shall have occurred and be continuing, applied against the Lessee's obligations hereunder as and when due. At such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount shall be paid to the Lessee to the extent not previously applied in accordance with the preceding sentence. (d) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee will cause its aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause such aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the scheduled expiration date for such policy. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such manner and in such reasonable amounts as are then generally applicable to other aircraft or engines of the Lessee of the same type and model as the Aircraft, but in no case shall such self-insurance with respect to all aircraft (whether owned or leased) in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft (and/or retentions) not in excess of the amount imposed by the aircraft hull or liability insurer shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least ten (10) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee or any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the first sentence of this Section 14.01, unless a material Default relating to maintenance or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain primary obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. Each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value, Termination Value or Make-Whole Premium, as the case may be, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that, in the case of insurance with respect to which cancellation or lapse for nonpayment is not effective as to the Lessor, the Indenture Trustee, the Holders or the Owner Participant for 30 days (seven days, in the case of any aircraft war risk coverage) no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 30 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the Lessee receives notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of 60 days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within 60 days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for 60 days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of 120 days after the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, to the extent Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, to the extent Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of this Lease, the Trust Agreement and the Indenture, the Lessee will cause each of them to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to suspend performance under, terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby acknowledges and consents to the Indenture Trustee's rights pursuant to the terms of the Indenture to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, to transfer or assign title to the Aircraft subject to this Lease, to make (jointly with the Lessor where provided in the Indenture) all waivers and agreements except as otherwise provided in the Indenture (including Section 8.01 thereof), to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture, including Section 8.01 thereof), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture, including Section 8.01 thereof); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee in accordance with the terms hereof shall instead be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs, Taxes and expenses, if any, incurred by the Lessor or the Owner Participant in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs, Taxes and expenses, if any, incurred by the Indenture Trustee or the Lessor or the Owner Participant in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant and the Indenture Trustee, that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement and the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Heading and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires and except in the case of the Original Agreements, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Article 13 of the Lease. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant. After-Tax Basis. A basis such that any payment to be received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment to be received. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Agent. Morgan Guaranty Trust Company of New York and its successors and permitted assigns as Agent for the Original Loan Participant pursuant to Article 16 of the Original Participation Agreement. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease. Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or the Refunding Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, as amended and restated on the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Ancillary Agreement II. The Ancillary Agreement II (Federal Express Corporation Trust No. N675FE), dated the Refunding Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Appraisal. The report prepared by BK Associates, Inc. and delivered to the Owner Participant (with an abbreviated report to the Lessee) on the Delivery Date pursuant to Section 4.01(n) of the Original Participation Agreement. Assignment and Assumption Agreement. Any agreement delivered in compliance with Section 7.03(d) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on September 18, 2021, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant under the Trust Agreement. Breakage Costs. Has the meaning specified in Schedule II to the Original Participation Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Stamford, Connecticut, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N675FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Change in Tax Law. Any change to the Code or the Treasury regulations promulgated thereunder or the publication of any revenue ruling, revenue procedure or any informational release by the Internal Revenue Service or the Department of Treasury either of which would change or would allow a change in the tax assumptions or structure upon which the lease economics were based, provided that the Owner Participant or the Lessee has notified the other party of such change in writing prior to the Refunding Date. Change in Tax Rate. Any amendment, modification, deletion, addition, or change to the Code which is enacted into law after the Delivery Date which changes the highest marginal statutory rate of Federal income tax applicable to the Owner Participant (other than a change which is in the nature of a minimum tax). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Original Loan Certificates. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Consent and Agreement. The Consent and Agreement dated as of June 1, 1998, executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. June 18, 1998. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 1, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. As defined in Section 8.01(b)(xii) of the Participation Agreement. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 60 days due to theft or disappearance or such longer period, not to exceed 180 days from the end of such initial 60-day period, if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such theft or disappearance constitutes an Event of Loss pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twenty-four (24) consecutive months or until the end of the Term, if earlier. The date of such Event of Loss shall be (s) the 61st day or the 241st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term or the Lessee's abandonment of diligent efforts to recover such property, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 12 month or 24 month period, referred to in clause (iv) above (or if earlier, the end of the Term or abandonment of the Lessee's efforts to restore the normal use of the Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity, expense, reimbursement or other payments paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any other Operative Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with Section 13.05 of the Lease but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any purchase price paid to the Owner Participant for its interest in the Trust Estate pursuant to Section 7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the Lease, payments constituting increases in Basic Rent attributable to payments arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vi) above and (viii) any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (v) and (vii) above (except with respect to interest attributable to payments referred to in clause (vi) above). Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming the Aircraft (or other property) is unencumbered by the Lease. In such determination, except for purposes of Section 17.01 of the Lease (when it shall be determined based upon the actual condition and location of the Aircraft), it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease and Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of the commencement of such Fixed Renewal Term and (ii) 50% of the average actual semi-annual Basic Rent payable during the Basic Term. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. French Pledge Agreement. The French Pledge Agreement dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant, the Original Loan Participant (to the extent set forth in Articles 8 and 9 of the Original Participation Agreement), the Indenture Trustee, in its individual capacity and as trustee, the Owner Participant Guarantor, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity in respect of which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Appraisal. An appraisal conducted pursuant to Section 4.03 of the Lease. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant, the Original Loan Participants or any other Holder or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to the Original Loan Participants or any other Holder, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof and which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which are severable from the Aircraft in accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of the Lease and the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, any Assignment and Assumption Agreement, each Liquidity Facility and the Intercreditor Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Original Agreements. The documents and instruments delivered on the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement. Original Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N675FE), dated the Delivery Date, among the Lessee, the Owner Participant, the Indenture Trustee and the Owner Trustee as it was originally executed on June 18, 1998. Original Indenture. The Trust Indenture, Mortgage and Security Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee and the Indenture Trustee, which together with the Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27401. Original Lease. The Lease Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Trustee as lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE), dated June 18, 1998 attached thereto was recorded as one instrument by the FAA on June 22, 1998 and assigned Conveyance Number BB27402. Original Loan Certificates. The loan certificates issued on the Delivery Date to the Original Loan Participant. Original Loan Participant. The entity listed on Schedule I to the Original Participation Agreement and its successors and assigns (other than any assignees in connection with the Refunding Date). Original Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, among the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee and the Original Loan Participant as it was originally executed on June 18, 1998. Original Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Lessee and the Owner Participant as it was originally executed on June 18, 1998. Original Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, between the Owner Participant and the Owner Trustee as it was originally executed and filed with the FAA on June 18, 1998. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Owner Participant. The trustor originally named in the Trust Agreement and any successor thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. Philip Morris Capital Corporation, a Delaware corporation, and any other provider of an Owner Participant Guaranty. Owner Participant Guaranty. The Owner Participant Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 7.03(d) of the Participation Agreement. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. State Street Bank and Trust Company, a Massachusetts trust company, and any other provider of an Owner Trustee Guaranty. Owner Trustee Guaranty. The Owner Trustee Guaranty dated the Delivery Date, as amended and restated as of the Refunding Date, by the Owner Trustee Guarantor in favor of the Lessee, the Owner Participant, the Indenture Trustee and the Pass Through Trustee, and any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages, as the case may be, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, among the Lessee, the Original Loan Participant, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. The proposed date of termination of the Lease as specified by the Lessee in its notice given pursuant to Section 10.01 thereof. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N675FE), dated as of June 15, 1998, between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement II. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Refunding Date. A Business Day on which the refunding of the Original Loan Certificates occurs, the expected date thereof having been specified by the Lessee in a written notice given to the parties to the Participation Agreement and the Underwriters at least three (3) Business Days prior to such expected Refunding Date. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Regulatory Change. Any change after June 18, 1998 in Federal, state or foreign law or regulations or the adoption or making after such date of any interpretation, directive or request applying to a class of financial institutions including any Certificate Holder of or under any Federal, state or foreign law or regulation (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N585FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between the State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. July 7, 1998, September 18, 2021 and each January 15 and July 15 commencing on July 15, 1998. Reoptimization Date. Has the meaning specified in Section 15.02(a) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of equal or greater value, airworthiness, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Department, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value for the Aircraft shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Stipulated Loss Value is to be calculated with reference to any such date; provided that if amounts in respect of Stipulated Loss Value are payable under the Operative Agreements after the Stipulated Loss Determination Date in respect of which such Stipulated Loss Value was determined, the Lessor shall be compensated during the period from the Stipulated Loss Determination Date to such payment date in accordance with the provisions of the Operative Agreements. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, FPO Price and amounts calculated by reference to Termination Value, any amounts of Make-Whole Premium payable under the Indenture to the extent provided in Section 3.03 of the Lease, and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Has the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Original Tax Indemnity Agreement as amended by Amendment No. 1 to the Original Tax Indemnity Agreement. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the seventh anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent through such date and, accordingly, no further accrual or credit shall be required through such date whenever Termination Value is to be calculated with reference to any such date; provided that if amounts in respect of Termination Value are payable under the Operative Agreements after the Termination Date in respect of which such Termination Value was determined, the Lessor shall be compensated during the period from the Termination Date to such payment date in accordance with the provisions of the Operative Agreements. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ------------ ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined in the Lessee's sole discretion) necessary, desirable or required to be made at any time on or after the seventh anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on (and only on) the first Rent Payment Date occurring at least six months after the Owner Participant has notified the Lessee that it will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment (or, in the event the Owner Participant disagrees with such judgment, in accordance with the appraisal procedures set forth in Section 4.03 of the Lease) would exceed $10,000,000 and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions for like-situated lessees through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clauses (i) and (iii) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02(a)(E) of the Lease. In the event that a Burdensome Indemnity Payment shall occur at any time on or after the seventh anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on (and only on) the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provides the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement which under the circumstances cannot be commercially reasonably avoided by the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which, in the opinion of independent tax counsel, can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 180 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable on the Business Day preceding the 15th day prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right and will pay all reasonable expenses of the Owner Participant, the Owner Trustee and the Indenture Trustee in connection therewith. SCHEDULE VI DESCRIPTION OF ORIGINAL LEASE Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between Federal Express Corporation, as lessee and State Street Bank and Trust Company of Connecticut, National Association, as owner trustee under Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998 between PMCC Leasing Corporation, as Owner Participant and State Street Bank and Trust Company of Connecticut, National Association, recorded by the Federal Aviation Administration on June 22, 1998 and assigned Conveyance No. BB27402, as supplemented by the following described instrument:
FAA FAA Date of Recording Conveyance Instrument Instrument Date Number - ---------- ---------- --------- ---------- Lease Supplement No. 1 (Federal Express Corporation Trust No. N675FE) 06/18/98 06/22/98 BB27402
DESCRIPTION OF AIRCRAFT One (1) Airbus A300F4-605R aircraft bearing manufacturer's serial number 789 and U.S. Registration No. N675FE and two (2) General Electric CF6-80C2-A5F aircraft engines bearing manufacturer's serial numbers 705-261 and 705-262 Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N675FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N675FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N675FE) dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement II. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President - ------------------------------------------------------------------------------ LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 790, REGISTRATION NO. N676FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page ---- Initial Recitals........................................................ 1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2016 or January 15, 2020, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N676FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N676FE and Manufacturer's serial number 790, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N676FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on July 15, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N676FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. October 13, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N676FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N676FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N677FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N676FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- ---------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N676FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N676FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N676FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President =============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 791, REGISTRATION NO. N677FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. =============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either January 15, 2016 or July 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N677FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N677FE and Manufacturer's serial number 791, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N677FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on August 26, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N677FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. November 24, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N677FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N677FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N678FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N677FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N677FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N677FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N677FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 792, REGISTRATION NO. N678FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.................................................. 1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term................ 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]...................................... 2 Section 3.02. Basic Rent...................................... 2 Section 3.03. Supplemental Rent............................... 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......... 3 Section 3.05. Minimum Basic Rent.............................. 3 Section 3.06. Payment to Indenture Trustee.................... 3 Section 3.07. Costs and Expenses.............................. 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options................................. 4 Section 4.02. Purchase Options................................ 5 Section 4.03. Appraisal Procedures............................ 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties.... 8 Section 5.02. No Modification of Other Warranties............. 9 Section 5.03. Certain Agreements of the Lessee................ 9 ARTICLE 6 LIENS Section 6.01. Liens........................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation......... 11 Section 7.02. Possession and Permitted Transfer and Sublease.. 13 Section 7.03. Insignia........................................ 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts............................ 18 Section 8.02. Pooling of Parts................................ 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications.......... 20 Section 9.02. Other Alterations and Modifications............. 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus........................................ 22 Section 10.02. Retention of Aircraft by the Lessor............ 24 Section 10.03. Voluntary Termination as to Engines............ 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights....................... 26 Section 11.02. Payment of Stipulated Loss Value............... 26 Section 11.03. Replacement of Airframe and Engines............ 27 Section 11.04. Event of Loss with Respect to an Engine........ 30 Section 11.05. Application of Payments from the Government or Others......................................... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government.................. 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe.................. 34 Section 11.08. Application of Payments During Existence of Certain Defaults............................... 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft............................. 35 Section 12.02. Return of Engines.............................. 36 Section 12.03. Return of Manuals.............................. 36 Section 12.04. Condition of Aircraft.......................... 36 Section 12.05. Delayed Return of Aircraft..................... 38 Section 12.06. Storage........................................ 38 Section 12.07. Special Markings............................... 39 Section 12.08. Lessor's Option to Purchase Parts.............. 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines.................................... 41 Section 13.03. Application of Insurance Proceeds.............. 44 Section 13.04. Reports........................................ 45 Section 13.05. Lessor's Insurance............................. 45 Section 13.06. Self-Insurance................................. 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection............................ 46 Section 14.02. No Obligation to Inspect....................... 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign....................... 47 Section 15.02. Citizenship.................................... 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default.............................. 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default................. 50 Section 17.02. Cumulative Remedies............................ 53 Section 17.03. Waiver......................................... 53 Section 17.04. Lessor's Right to Perform for Lessee........... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment................................ 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances............................. 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease................................ 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor............................... 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders... 57 Section 22.02. [Reserved]..................................... 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security....................................... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds................... 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease...................... 59 ARTICLE 25 NOTICES Section 25.01. Notices........................................ 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions.................. 60 Section 26.02. References..................................... 61 Section 26.03. APPLICABLE LAW................................. 61 Section 26.04. Severability................................... 61 Section 26.05. No Oral Modification........................... 61 Section 26.06. Agreement as Chattel Paper..................... 61 Section 26.07. Counterparts................................... 61 Section 26.08. Public Release of Information.................. 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties.......................... 62 Section 27.02. Section 1110 Compliance........................ 62 Section 27.03. Finance Lease.................................. 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either January 15, 2015 or July 15, 2018, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2017 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of June 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N678FE and Manufacturer's serial number 792, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N678FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on March 23, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N678FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. December 22, 1998. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N678FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N679FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2015 or July 15, 2018, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2017. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N678FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N678FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 793, REGISTRATION NO. N679FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government....................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either January 15, 2016 or July 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of June 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N679FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N679FE and Manufacturer's serial number 793, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N679FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on October 22, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N679FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. January 20, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N679FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N679FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N680FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N679FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N679FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N679FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N679FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 794, REGISTRATION NO. N680FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government....................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2016 or July 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N680FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N680FE and Manufacturer's serial number 794, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N680FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on May 12, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N680FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. February 10, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N680FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N680FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N680FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N680FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N680FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N680FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 799, REGISTRATION NO. N681FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals........................................................ 1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value,\ Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults................................................ 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either January 15, 2016 or July 15, 2019, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N681FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N681FE and Manufacturer's serial number 799, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N681FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on November 20, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N681FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 18, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N681FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N681FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on January 15, 2016 or July 15, 2019, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N681FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ------ --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement --------------- THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N681FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N681FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H : WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N681FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: __________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: __________________________________________ Name: Greg A. Hawley Title: Vice President ============================================================================== LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) Dated as of June 15, 1998 between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in its Individual Capacity, but Solely as Owner Trustee, Lessor and FEDERAL EXPRESS CORPORATION, Lessee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. 800, REGISTRATION NO. N682FE CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) DATED AS OF JUNE 15, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. ============================================================================== TABLE OF CONTENTS Page Initial Recitals.............................................................1 ARTICLE 1 DEFINITIONS ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term......................... 1 ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]............................................... 2 Section 3.02. Basic Rent............................................... 2 Section 3.03. Supplemental Rent........................................ 2 Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price.......................... 3 Section 3.05. Minimum Basic Rent....................................... 3 Section 3.06. Payment to Indenture Trustee............................. 3 Section 3.07. Costs and Expenses....................................... 4 ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options.......................................... 4 Section 4.02. Purchase Options......................................... 5 Section 4.03. Appraisal Procedures..................................... 7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties............. 8 Section 5.02. No Modification of Other Warranties...................... 9 Section 5.03. Certain Agreements of the Lessee......................... 9 ARTICLE 6 LIENS Section 6.01. Liens.................................................... 10 ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation.................. 11 Section 7.02. Possession and Permitted Transfer and Sublease........... 13 Section 7.03. Insignia................................................. 18 ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts..................................... 18 Section 8.02. Pooling of Parts......................................... 19 ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications................... 20 Section 9.02. Other Alterations and Modifications...................... 20 ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 22 Section 10.02. Retention of Aircraft by the Lessor..................... 24 Section 10.03. Voluntary Termination as to Engines..................... 25 ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights................................ 26 Section 11.02. Payment of Stipulated Loss Value........................ 26 Section 11.03. Replacement of Airframe and Engines..................... 27 Section 11.04. Event of Loss with Respect to an Engine................. 30 Section 11.05. Application of Payments from the Government or Others... 33 Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government....................................... 34 Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe............................... 34 Section 11.08. Application of Payments During Existence of Certain Defaults............................................... 35 ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft...................................... 35 Section 12.02. Return of Engines....................................... 36 Section 12.03. Return of Manuals....................................... 36 Section 12.04. Condition of Aircraft................................... 36 Section 12.05. Delayed Return of Aircraft.............................. 38 Section 12.06. Storage................................................. 38 Section 12.07. Special Markings........................................ 39 Section 12.08. Lessor's Option to Purchase Parts....................... 39 ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance..................................... 39 Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines................................................. 41 Section 13.03. Application of Insurance Proceeds....................... 44 Section 13.04. Reports................................................. 45 Section 13.05. Lessor's Insurance...................................... 45 Section 13.06. Self-Insurance.......................................... 46 ARTICLE 14 INSPECTION Section 14.01. Right of Inspection..................................... 46 Section 14.02. No Obligation to Inspect................................ 47 ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign................................ 47 Section 15.02. Citizenship............................................. 47 ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default....................................... 48 ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default.......................... 50 Section 17.02. Cumulative Remedies..................................... 53 Section 17.03. Waiver.................................................. 53 Section 17.04. Lessor's Right to Perform for Lessee.................... 53 ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment......................................... 54 ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances...................................... 54 ARTICLE 20 NET LEASE Section 20.01. Nature of Lease......................................... 55 ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor........................................ 56 ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders............ 57 Section 22.02. [Reserved].............................................. 57 Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 57 ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds............................ 57 ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease............................... 59 ARTICLE 25 NOTICES Section 25.01. Notices................................................. 59 ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions........................... 60 Section 26.02. References.............................................. 61 Section 26.03. APPLICABLE LAW.......................................... 61 Section 26.04. Severability............................................ 61 Section 26.05. No Oral Modification.................................... 61 Section 26.06. Agreement as Chattel Paper.............................. 61 Section 26.07. Counterparts............................................ 61 Section 26.08. Public Release of Information........................... 61 ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties................................... 62 Section 27.02. Section 1110 Compliance................................. 62 Section 27.03. Finance Lease........................................... 62 Schedule I Definitions Schedule II Basic Rent Schedule III Stipulated Loss Values Schedule IV Termination Values Schedule V Purchase Option Schedule Exhibit A Form of Lease Supplement LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) dated as of June 15, 1998 (this "Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the meanings assigned thereto as provided in Article 1 below; WHEREAS, subject to the terms and conditions set forth in the Participation Agreement (as hereinafter defined), the Lessee desires on the Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor is willing to lease to the Lessee the Aircraft (as hereinafter defined) in accordance with the terms and conditions set forth in this Lease. NOW, THEREFORE, in consideration of the mutual promises herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the Lessor and the Lessee agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the capitalized terms herein shall have the meanings given in Schedule I hereto, for all purposes of this Lease and shall be equally applicable to both the singular and the plural forms of the terms defined. ARTICLE 2 ACCEPTANCE UNDER THE LEASE Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject to satisfaction or waiver of the conditions set forth in this Lease and in the Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on the Delivery Date and agrees immediately thereafter to lease the Aircraft to the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the Aircraft from the Lessor, such lease to be evidenced by the execution by the Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. Such lease shall last for the Term, at all times during which full legal title to the Aircraft shall remain vested with the Lessor to the exclusion of the Lessee, notwithstanding the possession and use thereof by the Lessee or any other Person. The Lessee agrees that the Lessor will authorize one or more employees of the Lessee, designated by the Lessee in writing, as the authorized representative or representatives of the Lessor to accept delivery of the Aircraft pursuant to the sale of the Aircraft described in the Participation Agreement. The Lessee hereby agrees that in the event delivery of the Aircraft shall be accepted by an employee or employees of the Lessee pursuant to such authorization by the Lessor, such acceptance of delivery by such employee or employees on behalf of the Lessor shall, without further act, irrevocably constitute acceptance by the Lessee of the Aircraft for all purposes of this Lease. ARTICLE 3 RENT AND RENT ADJUSTMENT Section 3.01. [Reserved]. Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in immediately available funds, on each Rent Payment Date, Basic Rent for the Aircraft during the Basic Term, each payment being set forth on Schedule II hereto opposite the applicable Rent Payment Date, subject to increase or decrease as provided in Section 3.04 of this Lease. Each payment of Basic Rent shall be made in arrears or in advance, all as stated in Schedule II hereto. Each payment of Basic Rent designated as advance rent shall be allocated over the six-month period beginning on the Rent Payment Date on which such advance rent payment is scheduled to be made, and each installment of Basic Rent that is designated as payable in arrears shall be accrued over the six-month period ending on and including the day immediately preceding the Rent Payment Date on which such arrears payment is scheduled to be made. Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause to be paid to the Lessor, or to whomever shall be entitled to it, any and all Supplemental Rent promptly as the same shall become due. If the Lessee fails to pay any Supplemental Rent when due, the Lessor shall have all rights, powers and remedies provided for in this Lease, or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay to the Person entitled thereto, on demand, as Supplemental Rent, to the extent permitted by applicable law, an amount equal to interest at the Past Due Rate on any part of any installment of Basic Rent not paid when due, for any period until the same shall be paid and on any payment of Supplemental Rent not paid when due, for the period until the same shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental Rent, in the case of any prepayment of the Certificates pursuant to Section 6.02 of the Indenture (except in the case of any prepayment resulting from an Indenture Event of Default in the absence of an Event of Default) or any prepayment or purchase of the Certificates pursuant to clause (ii) of the first sentence of Section 8.02(a) of the Indenture, an amount equal to the aggregate amount of any Make-Whole Premium payable on such prepayment or purchase. The expiration or other termination of the Lessee's obligation to pay Basic Rent shall not limit or otherwise modify the obligations of the Lessee with respect to the payment of Supplemental Rent. Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value, Termination Value and EBO Price. Pursuant to and subject to the conditions contained in Section 2.03 of the Participation Agreement, the percentages for Basic Rent referred to in Schedule II hereto and the percentages for Stipulated Loss Value and Termination Value in Schedule III and Schedule IV hereto, respectively, and the EBO Price shall be adjusted (upward or downward). Section 3.05. Minimum Basic Rent. Notwithstanding any other provisions of the Operative Agreements to the contrary, each installment of Basic Rent due on each Rent Payment Date and not constituting an Excepted Payment shall be, under any and all circumstances, an amount at least sufficient to pay in full any installment of principal of and interest on the Certificates required to be paid pursuant to the Certificates (other than amounts becoming due on account of the exercise of remedies pursuant to Article 17 hereof) on such Rent Payment Date. Section 3.06. Payment to Indenture Trustee. All Rent payable by the Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, or as the Lessor may otherwise direct, by wire transfer of immediately available funds in U.S. Dollars with sufficient information to identify sources and applications of such funds no later than 10:30 a.m., New York time on the due date of such payment; provided, however, that so long as the Lien of the Indenture shall not have been discharged the Lessor hereby directs, and the Lessee agrees, that all Rent (other than Excepted Payments not constituting Basic Rent, which shall be paid by the Lessee directly to the Person entitled thereto) (all without set-off or counterclaim as and to the extent provided in Article 20 hereof) shall be paid directly to the Indenture Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or as the Indenture Trustee may otherwise direct by wire transfer of immediately available funds in U.S. Dollars no later than 10:30 a.m., New York time, on the due date of such payment. In any case where a scheduled Rent Payment Date shall not be a Business Day such Rent Payment Date shall be adjourned to the next succeeding Business Day without interest thereon for the period of such extension (provided that payment is made on such next succeeding Business Day). Section 3.07. Costs and Expenses. As between the Lessor and the Lessee, all obligations under this Lease shall be done, performed and complied with at the Lessee's cost and expense, whether or not so expressed, unless otherwise expressly stated to the contrary. ARTICLE 4 RENEWAL OPTIONS AND PURCHASE OPTIONS Section 4.01. Renewal Options. (a) Election to Renew or Purchase. The Lessee shall provide the Lessor with irrevocable written notice (the "Preliminary Notice") not more than 360 days nor less than 180 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, whether it will exercise its options either to renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B) hereof or, if a further Renewal Term is available, pursuant to Section 4.02(a)(C) hereof. Provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have timely delivered the respective Preliminary Notice, the Lessee may, by irrevocable written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or any prior Renewal Term, extend the Term for one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years. The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In addition, provided that (i) no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing at the time of renewal, (ii) this Lease has not otherwise expired or terminated, and (iii) the Lessee shall have delivered the Preliminary Notice, the Lessee may, on no more than two occasions, by written notice delivered to the Lessor not less than 30 days prior to the end of the Basic Term or the preceding Renewal Term, as the case may be, elect to extend the Term for a Renewal Term or further Renewal Term commencing on the expiration of the Basic Term or the preceding Renewal Term and ending one or two years thereafter for a rent equal to the then-current Fair Market Rental of the Aircraft. The Term may be extended pursuant to this paragraph for an aggregate of no more than two years following the Basic Term or any Fixed Renewal Term, if applicable. (b) Terms and Conditions. Any such renewal shall be on the same terms and conditions as provided herein, except that (i) rent for the Aircraft due during any Renewal Term shall be payable semi-annually in arrears on the dates corresponding to the Rent Payment Dates during such Renewal Term, and (ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall as of any Stipulated Loss Value Determination Date during the Renewal Term be equal to the higher of the Stipulated Loss Value and the Fair Market Value of the Aircraft as of the end of the Basic Term. Section 4.02. Purchase Options. (a) Election to Purchase. Provided that (i) this Lease has not otherwise expired or terminated, (ii) either no Event of Default shall have occurred and be continuing at the time of the notice provided below or, if an Event of Default occurs after such notice has been given, the Lessee shall have provided evidence reasonably satisfactory to the Lessor and the Owner Participant of its financial ability to purchase the Aircraft and (iii) the Lessee shall have previously given the Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B) below or, if a further Renewal Term is available, paragraph (C) below) or the applicable notice for each other paragraph below, as the case may be, the Lessee may: (A) by written notice delivered to the Lessor, the Indenture Trustee and the Owner Participant, not more than 360 nor less than 90 days prior to the applicable Rent Payment Date, elect to terminate the Lease and purchase the Aircraft on the Rent Payment Date falling on either July 15, 2016 or January 15, 2020, for, at the Lessee's option, either (1) an amount in immediately available funds equal to the greater of the Fair Market Value or the Termination Value on such date or (2)(i) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and (ii) the payment to the Lessor of an amount equal to the excess of (A) the greater of the Fair Market Value or the Termination Value on such date over (B) the unpaid principal of the Certificates plus accrued interest as of such date. Such notice (which shall be revocable by the Lessee upon at least 30 days' written notice prior to the applicable Rent Payment Date) shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement; or (B) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 nor less than 30 days prior to the end of the Basic Term, elect to purchase the Aircraft on the last day of the Basic Term for an amount equal to the Fair Market Value thereof on such date; or (C) by irrevocable written notice delivered to the Lessor and the Owner Participant not more than 360 days nor less than 180 days (30 days if a Preliminary Notice shall have been previously given) prior to the end of any Renewal Term, elect to terminate the Lease and purchase the Aircraft on the last day of such Renewal Term at a price equal to the Fair Market Value of the Aircraft on such day; provided, however, that the Lessee shall have paid all Rent due and payable under this Lease on or prior to the expiration of any such Renewal Term; or (D) exercise the purchase option in this Section 4.02(a)(D) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(D) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; (E) exercise the purchase option in this Section 4.02(a)(E) which is more particularly described in Schedule V hereto by reference to this Section 4.02(a)(E) and which shall be in an amount not less than the greater of the amount specified in Schedule V hereto and the Fair Market Value; or (F) to terminate this Lease on January 15, 2018 and purchase the Aircraft on such Rent Payment Date for an amount equal to the percentage of the Purchase Price set forth in Ancillary Agreement I with respect to this Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the greater of (i) the Termination Value as of such Rent Payment Date and (ii) the estimate set forth in the Appraisal of the Fair Market Value at the time of exercise of the purchase option under this Section 4.02(a)(F). The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days and not less than 90 days' prior written notice of its election to purchase pursuant to Section 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. In the event that the Lessee shall have given notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make payment (and, if applicable, assume the Certificates) on the applicable Termination Date, the Lease shall continue and the Lessee shall pay to the Owner Trustee any losses, costs and expenses of the Owner Participant incurred in connection with such failure. (b) Terms and Conditions. If the Lessee elects to purchase the Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the Lessor on the applicable Termination Date by wire transfer of immediately available funds any Basic Rent payable on such Termination Date (if payable in arrears but not if in advance), the applicable purchase price together with any other amounts past due hereunder and all other Supplemental Rent then due under this Lease including, without limitation, the aggregate amount of any Make-Whole Premium applicable to any Certificate (if such purchase occurs prior to the Premium Termination Date for such Certificate) and amounts due under the Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon discharge of the Lien of the Indenture in accordance with Section 14.01 thereof) the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft on an "as-is, where is" basis. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or arrange for the execution of a bill of sale evidencing such transfer and such other documents as the Lessee may reasonably require. In connection with any termination or proposed termination of this Lease, the Lessee shall pay, at the time of the applicable Termination Date, all related reasonable costs and expenses of the Owner Participant, the Lessor and the Indenture Trustee. Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair Market Rental or Fair Market Value is required to be determined under this Lease (unless otherwise provided herein), it shall be determined by the mutual agreement of the Lessor and the Lessee in accordance with the definitions of such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by the date 60 days prior to the date for exercise of the applicable option, such amount shall be determined by independent appraisal conducted by appraisers selected pursuant to Section 4.03(b) hereof. At any time prior to final determination of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor shall be entitled to submit to the appraisers (and shall submit to each other any bids submitted to the appraisers) any bids from unrelated third parties, and such bids shall be accorded the weight such appraisers deem appropriate. The Lessor and the Lessee shall each have an opportunity to comment on any such bids after receiving a copy thereof. (b) Selection. If an independent appraisal is required pursuant to this Lease, the Lessor and the Lessee shall consult for the purpose of appointing a mutually acceptable, qualified aircraft appraiser. If they are unable to agree on a single appraiser within ten (10) Business Days, then the independent appraisal shall be arrived at by mutual agreement of two nationally recognized, independent aircraft appraisers, one chosen by the Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on the amount of such appraisal, their appraisals shall be treated in the manner described in Section 4.03(c) hereof with an appraisal arrived at by a third nationally recognized, independent aircraft appraiser chosen by the mutual consent of such two appraisers; provided, however, that if either party shall fail to appoint an appraiser within fifteen (15) Business Days after a written request to do so by the other party, or if such two appraisers cannot agree on the amount of such appraisal and fail to appoint a third appraiser within twenty (20) Business Days after the date of the appointment of the second of such appraisers, then either party may initiate an arbitration proceeding with the American Arbitration Association for purposes of appointing a nationally recognized, independent aircraft appraiser. (c) Valuation. If one appraiser is chosen, the value determined by such appraiser shall be final and binding upon the Lessor and the Lessee. If two appraisers are chosen, one appraiser by the Lessor and one by the Lessee, and such appraisers agree on the value, such value shall be final and binding upon the Lessor and the Lessee. If three appraisers shall be appointed and the difference between the determination which is farther from the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged, and such average shall be final and binding upon the Lessor and the Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Lessor and the Lessee. (d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03 shall be conducted in accordance with the commercial rules of the American Arbitration Association as then in effect, as modified by this Section 4.03 and the definitions of Fair Market Value and Fair Market Rental. All expenses of any independent appraisal shall be borne by the Lessee, except that each of the Lessee and the Owner Participant (in the case of the Lessor) shall bear any fees, costs and expenses of its respective attorneys in connection with such appraisal except in the case of an Event of Default or in the case of a revocation by the Lessee of its election to terminate the Lease under Section 4.02 hereof, in which case such expenses shall be borne by the Lessee. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. Disclaimer of Representations and Warranties. THE LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS, AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section 5.01 have been negotiated by the Lessor and the Lessee and, except as provided in Article 7 of the Participation Agreement, are intended to be a complete exclusion and negation of any representations or warranties of the Lessor, the Indenture Trustee and the Owner Participant, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 5.02. No Modification of Other Warranties. None of the provisions of this Article 5 or any other provision of this Lease shall be deemed to amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers, with respect to the Airframe, the Engines or any Parts incorporated or installed in or attached to the Airframe or Engines, or to release the Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their respective subcontractors or suppliers from any such representation, warranty or obligation. So long as an Event of Default shall not have occurred and be continuing under this Lease and to the extent permitted under the applicable warranty, patent indemnity, or service-life policy, (i) the Lessor shall assign or otherwise make available to the Lessee such rights as the Lessor may have under any warranty, patent indemnity, or service-life policy made or given by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective subcontractors or suppliers, and any other claims against the Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or supplier with respect to the Aircraft, including all rights to demand, accept and retain all rights in and to property (other than the Aircraft), data and services of any kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to provide and do provide pursuant to the Purchase Agreement or the GTA with respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's or subcontractor's warranty, patent indemnity, or service-life policy obligation shall be paid to the Lessee and the Lessee shall apply such payments to the cost of repair or correction of any condition of the Aircraft which gave rise to such payments. Section 5.03. Certain Agreements of the Lessee. The Lessee agrees with the Lessor for the benefit of the Owner Participant that the Lessee shall perform the agreements, covenants and indemnities of the Lessee set forth in the Participation Agreement to the extent the same are applicable to the Owner Participant, as fully and to the same extent and with the same force and effect as if set forth in full in this Article 5. ARTICLE 6 LIENS Section 6.01. Liens. The Lessee will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to the Lessor's Estate or this Lease or the Aircraft, the Airframe or any Engine or any Part or title thereto or any interest therein except: (a) the respective rights of the Lessor and the Lessee as provided in this Lease, the security interest and Lien of the Indenture and the rights of the Owner Participant, the Lessor and the Indenture Trustee under the Trust Agreement, the Indenture and the Participation Agreement; (b) the rights of any sublessee or transferee or other Person under a sublease, transfer, assignment or other such arrangement expressly permitted by the terms of this Lease; (c) Lessor's Liens and Indenture Trustee's Liens to the extent required to be discharged by the Owner Participant, the Lessor or the Indenture Trustee, as the case may be, in accordance with Section 7.03(b), 7.04(b) or 7.05(b) of the Participation Agreement; (d) Liens for Taxes imposed against the Lessee either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein or any material risk of civil liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner Participant shall be indemnified to its satisfaction against such liabilities by the Lessee) or any risk of the assertion of criminal charges against the Lessor, the Owner Participant, the Indenture Trustee or any Holder; (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising against the Lessee in the ordinary course of the Lessee's business for amounts the payment of which is either not yet due or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein; and (f) Liens arising from judgments or awards against the Lessee with respect to which (i) at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any interest therein. ARTICLE 7 AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION Section 7.01. Registration, Maintenance and Operation. The Lessee, at its own cost and expense, shall: (a) upon payment by the Lessor of the Purchase Price on the Delivery Date, cause the Aircraft to be duly registered in the name of the Lessor as owner, pursuant to the Transportation Code and, subject to the proviso to Section 6.03(b) of the Participation Agreement, to remain at all times duly registered pursuant to the Transportation Code and at all times act in accordance with the rules and regulations of the Aeronautics Authority or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (b) maintain, inspect, service, repair, test and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted, and in any event (i) in accordance with the applicable regulations of the Aeronautics Authority or of the regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered pursuant to Section 6.03(b) of the Participation Agreement and the Lessee's maintenance program approved by the Aeronautics Authority or such agency or body, (ii) in the same manner and with the same care used by the Lessee with respect to other A300-600 series aircraft and CF6-80C2-A5F series engines (or other engines permitted by the terms of this Lease to be used on the Aircraft) owned, operated or leased by the Lessee, to the extent that the same regulations, and the Lessee's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Lessee, and utilized in similar circumstances, and without discriminating against the Aircraft, with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to the Lessor upon such expiration or termination, and (iii) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Transportation Code or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered; (c) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, all such records and logs to be maintained in the English language, to the extent required by the Transportation Code (which records, logs and other materials shall, as between the Lessor and the Lessee and all parties claiming through the Lessee, be the property of the Lessor but shall become the property of the Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event of Loss and the Lessee's compliance with Section 11.03 hereof); (d) promptly furnish to the Lessor such information within the Lessee's possession as may be required to enable the Lessor to file any reports to be filed by the Lessor with any governmental authority because of the Lessor's ownership of or the Owner Participant's interest in the Aircraft; (e) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Lessee or the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Lessee (or if a sublease shall then be in effect, the sublessee thereunder) may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Lessor, its right, title or interest in the Aircraft or any Engine or the interests of the Indenture Trustee or the Owner Participant therein, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement) and such contest or non-compliance will not result in any material risk of loss, forfeiture or damage to the Aircraft or in any risk of criminal liability to the Lessor, the Indenture Trustee or the Owner Participant; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Lessee will conform the same therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; and (f) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy required by the terms of Article 13 hereof or (y) in any war zone or in the Lessee's reasonable judgment, area of recognized hostilities, unless the Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Article 13 hereof covering such area (except, in the case of a requisition for use by the Government, to the extent that the Lessee certifies that such insurance is unobtainable after diligent effort or is obtainable only at unreasonably high rates or on unduly financially burdensome terms and conditions) (and naming the Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Lessee is using its good faith efforts to remove the Aircraft from such area. The Lessee may, at any time during the Term, install an engine or engines on the Airframe and operate the Aircraft with such engine or engines installed thereon and the Lessor shall have no right, title or interest in and to any such engine until such time, if any, that such engine is returned to the Lessor under Section 12.02 hereof. Section 7.02. Possession and Permitted Transfer and Sublease. (a) Conditions. The Lessee will not, without the prior written consent of the Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) in the case of clause (i) below, no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all applicable governmental approvals in connection therewith have been obtained and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the Lessee may without the prior written consent of the Lessor: (i) so long as the sublessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the sublease is entered into (and on the date of notice from the Lessee) and with 30 days' prior written notice to the Lessor and the Owner Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier, (B) sublease the Aircraft or any Engine to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule III of the Participation Agreement, (C) sublease the Aircraft or any Engine to an Air Carrier that is principally based in and a domiciliary of a country which is a party to the International Convention on the Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any Engine to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Lessor as evidenced by its prior written consent; provided, that, with respect to clauses (B) and (C) above, at the time of any such sublease the United States of America maintains full diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any sublease (x) such sublease shall include the provisions required by Section 7.02(b) hereof and expressly require the sublessee to operate and maintain the Aircraft in compliance with the applicable provisions of this Lease, (y) such sublease shall provide that such sublessee will not transfer possession of, or any other rights to, the subleased Airframe or any Engine to any other Person without the prior written consent of the Lessor (except as permitted by subparagraphs (ii) through (viii) below) and (z) such sublease shall expire not later than the expiration of the Basic Term or any applicable Renewal Term hereof. Prior to any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the sublessee taken as a whole shall not be materially less stringent than those of the FAA and the sublease will provide that the maintenance performed during such sublease will meet in all material respects such maintenance standards; (II) the Lessee will provide opinions of counsel (such counsel and the form and substance of such opinions to be reasonably satisfactory to the Lessor and the Indenture Trustee) with respect to (A) the legality, validity and enforceability of the Operative Agreements and the sublease in such country, (B) that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into U.S. dollars for the loss of the use of or title to the Aircraft in the event of a requisition of use or title by such government, (C) the Lessor's title to the subleased equipment will be recognized, (D) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability), (E) that it is not necessary for the Owner Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such country as a result of the proposed sublease or in order for the Owner Participant, the Lessor or the Indenture Trustee to enforce the terms and conditions of the Operative Agreements, (F) there is no tort liability of the owner of an aircraft not in possession thereof or of Persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction other than tort liability which might have been imposed on such owner or Persons under the laws of the United States or any state thereof (it being understood that, in the event that such latter opinion cannot be given in a form satisfactory to the Lessor, such opinion shall be waived if insurance reasonably satisfactory to the Lessor is available to cover such risk to the Owner Participant and is provided at or before the execution of such a sublease, at the Lessee's cost and expense) and (G) that there exist no possessory rights in favor of such sublessee under the laws of such country which would, upon bankruptcy or insolvency of the Lessee (and assuming that at such time such sublessee is not bankrupt or insolvent) prevent the return of the Aircraft in accordance with the terms of this Lease; (III) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and the Lessee as sublessor), shall have been procured at the Lessee's own cost and expense by the Lessee prior to commencement of any such sublease; (IV) duties and tariffs, if applicable, shall be paid for by the Lessee; and (V) the Lessee shall effect or cause to be effected at the Lessee's own cost and expense all recordings and filings that are required to continue the Lessor's right, title and interest to the Aircraft and rights under the Lease (and sublease) and to perfect and maintain the priority of the Lien of the Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Lessee in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any foreign Air Carrier which is (I) organized in a country listed on Schedule III to the Participation Agreement, (II) organized in a country with which the United States then maintains full diplomatic relations, (III) is a party to the Convention on the International Recognition of Rights in Aircraft or (IV) otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Lease shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to or registration of the Airframe or any Engine, and if the Lessor's title to any Engine shall nonetheless be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 of this Lease in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, service, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of Article 9 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program administered pursuant to Executive Order No. 12056, as amended ("CRAF Program"), or any similar or substitute programs of the Government, so long as the Lessee (or any permitted sublessee or transferee pursuant to this Section) shall promptly notify the Lessor upon such transfer of possession and provide the Lessor and the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft, provided, that if such transfer of possession continues beyond the end of the Basic Term or the then-current Renewal Term, the Basic Term or the Renewal Term, as applicable, shall be automatically extended (including the obligation to pay Rent per diem at a rate equal to the Fair Market Rental or such higher compensation being paid by the Government pursuant to the CRAF Program) for six (6) months after the end of the Term (or, if shorter, until the date of return of the Aircraft, so long as the Lessor receives at least six (6) months' notice of such date of return); (v) install or permit the installation of an Engine on an airframe which is owned by the Lessee or any permitted sublessee free and clear of all Liens, except (A) Liens of the type permitted under Section 6.01 hereof, (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Lessee or any permitted sublessee or transferee or purchased by the Lessee subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Lessee shall have received from the lessor, conditional vendor or secured party of such airframe an agreement (which may be the lease or conditional sale or other security agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 7.02(a); (vii) install or permit the installation of an Engine on an airframe owned by the Lessee, leased to the Lessee or purchased by the Lessee subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 7.02(a) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Lessee shall comply with Section 11.04 hereof in respect of such Engine, the Lessor not intending to waive any right, title or interest it may have to or in such Engine under applicable law until compliance by the Lessee with such Section 11.04; and (viii) enter into a wet lease under which the Lessee has effective control of the Aircraft in the ordinary course of the Lessee's business which shall not be considered a transfer of possession hereunder, provided that the Lessee's obligations under this Lease shall continue in full force and effect notwithstanding any such wet lease. (b) Rights of Transferee. Notwithstanding the provisions of Section 7.02(a) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 7.02(a) hereof shall be subject and subordinate to, and any sublease or wet lease permitted by Section 7.02(a) hereof shall be made expressly subject and subordinate to, all the terms of this Lease, including, without limitation, the Lessor's right to repossession pursuant to Article 17 hereof and to avoid such sublease upon such repossession, and the Lessee shall remain primarily liable for the performance of all the terms of this Lease to the same extent as if such sublease or transfer had not occurred. Any such sublease shall include appropriate provisions for the maintenance, inspection (as required by Section 14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Lease and shall provide assurances reasonably satisfactory to the Lessor that the sublessee may not further sublease any of such equipment. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee 10 Business Days' prior written notice of any sublease of the Airframe with a term in excess of one year. The Lessee shall promptly provide the Lessor, the Owner Participant and the Indenture Trustee a copy of any sublease which has a term in excess of one year (and, if so requested by the Lessor, a copy of any other sublease) and, prior to execution and delivery of any sublease deliver to Lessor all other documents required hereunder relating to such sublease or transfer of possession. (c) No Release of Lessee/Costs of Subleasing. No sublease, interchange or pooling agreement or other relinquishment of possession permitted under this Article 7 of any of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of the Lessee's obligations to the Lessor, the Indenture Trustee or the Owner Participant under this Lease, the Participation Agreement or the Tax Indemnity Agreement or constitute a waiver of any of the Lessor's rights and remedies hereunder or thereunder or extend beyond the end of the Term (except as provided in Section 7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the Lessee will retain the right to cure any default by any sublessee permitted pursuant to this Section 7.02 and to terminate such sublease upon such default. The Lessee shall pay all costs of the Owner Participant, the Indenture Trustee and the Lessor incurred in connection with any subleasing or proposed subleasing. (d) Certain Notifications. Prior to any sublease of the Aircraft pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's written notice identifying the Aircraft to be subleased, together with the name of the sublessee and the country of domicile of such sublessee. In connection with any sublease to an Air Carrier permitted under Section 7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II) hereof and information on the insurance coverage referred to in Section 7.02(a)(i)(II)(F) hereof. Section 7.03. Insignia. (a) Nameplate. On or prior to the Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate bearing the inscription "STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien of the Indenture, the additional inscription "FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary, from time to time, with a nameplate reflecting the name of any successor Lessor or successor Indenture Trustee, in each case as permitted by the Operative Agreements). (b) Lessee's Marks. Except as provided in Section 7.03(a) hereof, the Lessee will not allow the name of any Person to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership; provided, that during the Term, the Lessee may cause the Aircraft to be lettered "Federal Express Corporation" or may letter, paint or mark it in some other appropriate manner for convenience of identification of the Lessee's interest or the interest of any permitted sublessee (including but not limited to the Lessee's or any permitted sublessee's customary colors and insignia) and to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts of either. ARTICLE 8 REPLACEMENT AND POOLING OF PARTS Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 8.02 hereof and Liens permitted under Section 6.01 hereof) and shall be in at least as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, and in any event not less than the condition and repair required to be maintained by the provisions of this Lease. (b) Title. All Parts at any time removed from the Airframe or any Engine shall remain the property of the Lessor until such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Airframe or such Engine and which meet the requirements for replacement parts specified in Section 8.01(a) hereof. Immediately upon any replacement part (other than, to the extent permitted by Section 8.02 hereof, a replacement part subject to a pooling arrangement) becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act: (i) title to the replaced Part shall vest in the Lessee, free and clear of all rights of the Lessor, and such replaced Part shall no longer be deemed a Part under this Lease; (ii) title to such replacement part shall vest in the Lessor free and clear of all Liens (except for Liens permitted by Section 6.01 hereof) and shall thereupon be and become a Part; and (iii) such replacement part shall become subject to this Lease and to the Lien of the Indenture, and shall be deemed part of the Airframe or such Engine for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. Section 8.02. Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 8.01(a) hereof may be subjected by the Lessee to any normal pooling arrangement customary in the U.S. airline industry and entered into with vendors and other Air Carriers in the ordinary course of the Lessee's business, provided that the part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine in accordance with Section 8 hereof, as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 8.01(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Lessee, at its own cost and expense and as promptly as possible, either: (a) causes title to such replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof by the Lessee acquiring title to such replacement part for the benefit of, and transferring such title to, the Lessor free and clear of all Liens (other than Liens permitted under Section 6.01 hereof); or (b) replaces such replacement part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement part owned by the Lessee free and clear of all Liens (other than Liens permitted under Section 6.01 hereof) and by causing title to such further replacement part to vest in the Lessor in accordance with Section 8.01(b) hereof. All such replacement parts and further replacement parts shall meet the standards set forth in the last sentence of Section 8.01(a) hereof. ARTICLE 9 ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 9.01. Required Alterations and Modifications. The Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Lessee's or any sublessee's operations and aircraft; provided, however, that the Lessee or sublessee, as the case may be, may in good faith contest the validity or application of any such requirements in any reasonable manner that does not involve any material risk of civil liabilities (unless indemnified by the Lessee) or any risk of criminal penalties being imposed on or against the Indenture Trustee, the Owner Participant or the Lessor, that does not involve any material risk or danger of loss, forfeiture or sale of the Aircraft or any Engine and that does not adversely affect the Lessor, its title or interest in the Aircraft or any Engine, the first and prior perfected Lien and security interest of the Indenture, or the interests of the Indenture Trustee or the Owner Participant in the Airframe or any Engine, or in any Operative Agreement (excluding any interests indemnified for under the Tax Indemnity Agreement). All such alterations, modifications or additions shall be made on or before the date mandated therefor, taking into account authorized postponements resulting from a contest or otherwise and shall be made at such time and in such a manner so as not to discriminate against the Aircraft whether by reason of its leased status or otherwise. Section 9.02. Other Alterations and Modifications. (a) Generally. The Lessee, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Lessee may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal, individually or in the aggregate, shall create any adverse tax consequences for the Owner Participant not otherwise indemnified for, diminish the value, remaining useful life, or utility of the Airframe or the value or utility of any Engine or impair its condition or state of airworthiness below its value, remaining useful life (in the case of the Airframe only), utility, condition and state of airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and state of airworthiness required to be maintained by the terms of this Lease, or cause the Airframe or any Engine to become "limited use property" within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value (but not the remaining useful life, utility, condition or state of airworthiness) of the Aircraft may be reduced by the value, if any, of any such Obsolete Parts which shall have been removed; provided that in no event shall the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced exceed $500,000. (b) Title to Installed Parts. Title to each part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to Section 9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become subject to this Lease; provided, however, that the Lessee may remove any such Part at any time during the Term if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to the terms of Article 7 hereof or the first sentence of Section 9.01 hereof; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Airframe or such Engine (it being understood that the Lessee shall repair any damage caused by a permitted removal) or diminishing or impairing the value, utility, condition or state of airworthiness or remaining useful life of the Airframe required to be maintained by the terms of this Lease or (B) diminishing the value, utility or remaining useful life (in the case of the Airframe) or the value and utility (in the case of such Engine) which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Airframe or such Engine was then in the condition required to be maintained by the terms of this Lease. (c) Title to Removed Parts. Upon the removal by the Lessee of any such Part as provided in subsection (b) above, title thereto shall, without further act, vest in the Lessee and such Part shall no longer be deemed a Part. Any Part not removed by the Lessee as above provided prior to the return of the Aircraft to the Lessor hereunder shall remain the property of the Lessor and subject to this Lease. ARTICLE 10 VOLUNTARY TERMINATION Section 10.01. Right of Termination Upon Obsolescence or Surplus. (a) Option to Terminate. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, on any Termination Date, on at least 180 days' prior written notice (which notice shall state the proposed Termination Date (the "Proposed Termination Date")) to the Lessor and the Owner Participant to terminate this Lease as of a Termination Date if the Aircraft shall have become obsolete or surplus to the operations of the Lessee; provided that the Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner Participant a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer stating the determination of the Lessee that the Aircraft is obsolete or surplus to its needs. Unless the Lessor has elected to retain the Aircraft as herein provided, the Lessee shall on no more than two occasions have the right to revoke its notice of termination not less than ten (10) days prior to the Proposed Termination Date whereupon this Lease shall continue in full force and effect; provided that the Lessee may not revoke its notice if a cash bid which is for an amount greater than or equal to Termination Value has been submitted for the purchase of the Aircraft. (b) Sale Procedure. During the period from the giving of notice pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the Lessee, as non-exclusive agent for the Lessor, shall use its reasonable efforts to obtain bids for the cash purchase on the Proposed Termination Date (or such earlier date as shall be consented to in writing by the Lessor) of the Aircraft. On the Proposed Termination Date, the Engines shall be installed on the Airframe (provided that the Airframe may be sold with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being sold with the Airframe equals two). The Lessor may, if it desires to do so, seek to obtain such bids. The Owner Participant shall not inspect any bids received by the Lessee with respect to the Aircraft, unless the Owner Participant has given to the Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft and if such notice has been given, the Lessee will provide the Lessor with copies of bids received by the Lessee. No bid may be submitted by the Lessee or any Person affiliated with the Lessee (or with whom or which there is any arrangement or understanding as to the subsequent use of the Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting on behalf of the Lessee. The Lessee may reject any bid which is less than the sum of the applicable Termination Value, the aggregate amount of any Make-Whole Premium and all other expenses incurred by the Lessor, the Owner Participant and the Indenture Trustee in connection with the sale. Subject to the provisions of Section 10.02 hereof, on the Proposed Termination Date or such earlier date of sale as shall be consented to in writing by the Lessor, the Lessee shall deliver the Airframe which shall have the Engines installed on it (provided that the Airframe may be delivered with installed engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and Replacement Engines being delivered with the Airframe equals two and the Lessee shall comply with the provisions of Section 11.04 hereof as if an Event of Loss occurred with regard to the Engines) to the bidder which shall have submitted the highest cash bid (whether certified to the Lessor by the Lessee or directly received by the Lessor and certified to the Lessee) in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, at a location specified by such bidder, and shall duly transfer to the Lessor title to any such engines not owned by the Lessor, and the Lessor shall, upon payment in full of the bid price and all amounts due and owing pursuant to Section 10.01(c) hereof by wire transfer of immediately available funds and upon discharge of the Lien of the Indenture in accordance with Article XIV thereof, sell the Airframe and Engines or engines to such bidder without recourse or warranty (except as to the absence of Lessor's Liens). (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Net Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium, if the Proposed Termination Date occurs prior to the applicable Premium Termination Date) under this Lease and any other Operative Agreement. (d) Transfer of Uninstalled Engines. Upon payment of the amounts described in Section 10.01(c) hereof and upon transfer to the Lessor of title to engines which have been returned in lieu of Engines as provided in Section 10.01(b) hereof, and upon payment of all other amounts then due under this Lease, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced with engines pursuant to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (e) Limitation on the Lessor's Duties. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take any action in connection with any such sale other than to transfer to the purchaser named in the highest cash bid (determined as described in Section 10.01(b) above) as referred to above (or to such purchaser and to the Lessee, as the case may be), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to the Aircraft, against receipt by the Lessor of the payments provided for. (f) Termination of the Lessee's Obligations. Upon the sale of the Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Proposed Termination Date. If no sale shall have occurred on or before the Proposed Termination Date, this Lease shall continue in full force and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed that the Lessee has rescinded its notice of termination, and the Lessee shall pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner Participant in connection with the proposed sale. Section 10.02. Retention of Aircraft by the Lessor. (a) Generally. Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section 10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's notice of termination given in accordance with Section 10.01(a) hereof, by giving the Lessee and the Indenture Trustee written irrevocable notice of such election not less than thirty (30) days prior to the Proposed Termination Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed Termination Date, by wire transfer of immediately available funds the sum of: (i) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date if payable in arrears but not if payable in advance; plus (ii) all other amounts then due and payable by the Lessee under this Lease and any other Operative Agreement, including the aggregate amount of any Make-Whole Premium (if the Proposed Termination Date occurs prior to the applicable Premium Termination Date), on or prior to the Payment Date. (b) Payment of the Certificates. It shall be an absolute condition precedent to the Lessor's right to retain the Aircraft and to the termination of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to the extent set forth in Section 10.02(a) hereof) shall have paid to the Holders and such Holders shall have received the entire outstanding principal amount of, the aggregate amount of any Make-Whole Premium and accrued interest on the Certificates on the Proposed Termination Date and all other sums due and owing to the Indenture Trustee and the Holders on or prior to the Proposed Termination Date under this Lease, the Indenture or any other Operative Agreement. (c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall deliver the Airframe and the Engines (provided that the Airframe may be delivered with engines meeting the requirements set forth herein for Replacement Engines in lieu of the Engines so long as the aggregate number of Engines and engines being delivered with the Airframe equals two and provided that the other requirements of Section 11.04 hereof are met as if an Event of Loss has occurred with regard to the Engines) to the Lessor in the same manner as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall duly transfer to the Lessor right, title and interest to any such engines not owned by the Lessor, all in accordance with Article 12 hereof. Upon such delivery of the Airframe and Engines or engines to the Lessor and payment by the Lessee of any amounts required to be paid by the Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest in and to any Engines which were replaced by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee releasing such Engines from the Lien of the Indenture. (d) Termination of the Lessee's Obligations. Upon compliance by the Lessor and the Lessee with the provisions of this Section 10.02 and upon compliance by the Lessee with the further provisions of this Article 10, the obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date occurring after the Proposed Termination Date and the Term shall end effective as of the Termination Date. Section 10.03. Voluntary Termination as to Engines. The Lessee shall have the right at its option and at any time, on at least thirty (30) days' prior written notice to the Lessor, to terminate this Lease with respect to any Engine not then installed or held for use on the Airframe, provided that prior to the date of such termination, the Lessee shall comply with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine. ARTICLE 11 LOSS, DESTRUCTION, REQUISITION Section 11.01. Lessee's Election Rights. The Lessee shall notify the Lessor, the Indenture Trustee and the Owner Participant as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes, or would with the passage of time constitute, an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Lessor, the Indenture Trustee and the Owner Participant delivered within 60 days of the occurrence of any Event of Loss, the Lessee shall have the right to elect the alternative set forth in Section 11.02 hereof or the alternative set forth in Section 11.03 hereof. The Lessee's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 11.02 hereof. Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee shall, if it has so elected or is deemed to have so elected under Section 11.01 hereof, pay to the Lessor, by wire transfer of immediately available funds on the earlier of (i) the third Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 11.05 hereof, in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value for the Aircraft, determined as of the Stipulated Loss Value Determination Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs on a Stipulated Loss Value Determination Date, determined as of such Stipulated Loss Value Determination Date) together with interest on such amount at the Debt Rate from such Stipulated Loss Value Determination Date to the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or prior to the relevant Stipulated Loss Value Determination Date and unpaid, plus (C) any and all Supplemental Rent due and payable on or prior to such Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture Trustee or the Holders under the Indenture and the other Operative Agreements, plus (E) any reasonable out-of-pocket expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by the Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the portion, if any, of the Basic Rent installment due and paid by the Lessee on such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof to the extent such Basic Rent installment (or portion thereof) is designated on Schedule II hereto as being payable in advance, together with an imputed interest amount in respect of such advance payment of Basic Rent (or portion thereof) at the Debt Rate from the date of payment of such Basic Rent installment (or portion thereof) by the Lessee to the Loss Payment Date; provided that in no event shall there be subtracted pursuant to clause (F) an amount such that the Holders shall not be paid in full. (b) Termination of Lease; Title Transfer. Upon payment in full of the amounts due pursuant to Section 11.02(a) hereof, the obligation of the Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the payment of such amounts shall terminate and the Term shall end. Further, upon such payment, the Lessor will transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe, Engines and engines with respect to which such Event of Loss occurred, as well as all of the Lessor's right, title and interest in and to any Engines constituting part of the Aircraft but not installed on the Airframe when such Event of Loss occurred, and will deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing the Aircraft from the Lien of the Indenture. Section 11.03. Replacement of Airframe and Engines. (a) Generally. So long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and subject to Section 11.01 hereof, if the Lessee has elected to replace the Airframe and Engines suffering an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which such Event of Loss has occurred, good and marketable title to an Airbus A300-600 series airframe manufactured no earlier than January 1, 1997 (the "Replacement Airframe") and good and marketable title to a number of Replacement Engines equal to the number of Engines with respect to which an Event of Loss has occurred, provided that following compliance with all other terms of this Section 11.03 each Engine shall be of identical make and model and, in the case of such Replacement Airframe and each such Replacement Engine, owned by the Lessee free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority, and having in the case of the Replacement Airframe a value, remaining useful life and utility, and in the case of the Replacement Engines a value and utility, at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and state of airworthiness required to be maintained by the terms of this Lease immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Lessee, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with originals of, and the Lessor with copies of, full warranty bills of sale, in form and substance satisfactory to the Lessor and the Indenture Trustee, with respect to such Replacement Airframe and Replacement Engines together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer or manufacturers to such assignment; (ii) cause such Replacement Airframe and Replacement Engines to be duly registered in the name of the Lessor pursuant to the Transportation Code or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 6.03(b) of the Participation Agreement; (iii) cause a Lease Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement; (iv) furnish the Lessor, the Indenture Trustee and the Owner Participant with an appraisal or other report of a nationally recognized aircraft appraiser based on an inspection of such Replacement Airframe and Replacement Engines reasonably satisfactory to the Indenture Trustee and the Owner Participant certifying that such Replacement Airframe has a value, remaining useful life and utility, and such Replacement Engines have a utility and, in the aggregate, value, at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (v) furnish the Lessor, the Indenture Trustee and the Owner Participant with such evidence as the Lessor or the Indenture Trustee may reasonably request of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Airframe and Replacement Engines; (vi) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that the Owner Participant and the Lessor will suffer no adverse tax consequence not otherwise indemnified for as of the Delivery Date as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant, together with an opinion of counsel (otherwise complying with clause (vi)(A) above) that there is Substantial Authority (as defined in the Tax Indemnity Agreement) that neither the Owner Participant nor the Lessor will suffer any adverse tax consequences as a result of such substitution or, at the Lessee's discretion, a More Likely than Not Opinion (as so defined) to the same effect; (vii) comply with the provisions of Section 9.08 of the Indenture; (viii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Airframe and Replacement Engines to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Lien of the Indenture shall constitute a first priority, duly perfected Lien and security interest on and in respect of such Replacement Airframe and Replacement Engines; (ix) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as a secured party with the Secretary of State of Connecticut and the filing of a notice with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Airframe and Replacement Engines shall be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Airframe and Engines; (x) furnish the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Airframe and Replacement Engines, and (B) such Replacement Airframe and Replacement Engines have been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Airframe and Replacement Engines); and (xi) cause to be delivered to the Lessor, the Owner Participant and the Indenture Trustee an opinion of counsel to the Lessee addressed to the Lessor, the Owner Participant and the Indenture Trustee as to the due registration of the Aircraft and the due recordation of the requisite documents or instruments and the validity and perfection of the Lien in such Replacement Airframe and Replacement Engines. (b) Title to Replaced Equipment. Upon compliance by the Lessee with the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Airframe and Engines with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Any Engine constituting part of the Aircraft, but not installed on the Airframe when such Event of Loss occurred, shall continue to be property of the Lessor and leased under this Lease as part of the same equipment as the Replacement Airframe and Replacement Engines. (c) Definitions. Each Replacement Airframe and Replacement Engine shall be deemed part of the property leased under this Lease, each such Replacement Airframe shall be deemed an "Airframe," each such Replacement Engine shall be deemed an "Engine" and each such Replacement Airframe and Replacement Engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Rent Adjustments. An Event of Loss covered by this Section 11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values but may result in payments pursuant to the Tax Indemnity Agreement and the Participation Agreement. (e) Time Limitations. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 120 days of the occurrence of the applicable Event of Loss, in the event that any amounts held by the Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day. If the Lessee has elected to proceed under this Section 11.03 but has not fully performed its obligations under this Section 11.03 within 180 days of the occurrence of such Event of Loss, the Lessee shall be deemed to have elected to proceed under Section 11.02 hereof and shall immediately perform its obligations thereunder, and the Indenture Trustee, or the Lessor if the Indenture shall have been discharged, shall apply the amounts held by it pursuant to the preceding sentence as a credit against such obligations. Section 11.04. Event of Loss with Respect to an Engine. (a) Generally. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Lessee shall give the Lessor and the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within sixty (60) days after the occurrence of such Event of Loss, duly convey or cause to be conveyed to the Lessor, a Replacement Engine for the Engine with respect to which such Event of Loss occurred, good and marketable title to a Replacement Engine, free and clear of all Liens not excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss, provided that after any replacement, each Engine shall be of identical make and model and any Replacement Engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial aviation industry on Airbus A300-600 series airframes. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Lease. (b) Conditions Precedent. Prior to or at the time of any conveyance of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost and expense will: (i) furnish the Lessor with an original of, and the Indenture Trustee with a copy of, a full warranty bill of sale, in form and substance satisfactory to the Lessor, with respect to such Replacement Engine together with an assignment in form and substance satisfactory to the Lessor and the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Lessor and the Indenture Trustee from such manufacturer to such assignment; (ii) cause a Lease Supplement covering such Replacement Engine to be duly executed by the Lessee and filed for recordation pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 6.03(b) of the Participation Agreement and, if the Engine being replaced was registered under the applicable laws of the jurisdiction in which the Aircraft is then registered, the Replacement Engine shall be registered in the same fashion; (iii) furnish the Lessor and the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Lessor and the Indenture Trustee certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in at least the condition and repair required by the terms of this Lease immediately prior to the occurrence of such Event of Loss; (iv) furnish the Lessor with such evidence of compliance with the insurance provisions of Article 13 hereof with respect to such Replacement Engine as the Lessor or the Indenture Trustee may reasonably request; (v) provide the Owner Participant and the Lessor with (A) an opinion of counsel selected by the Owner Participant and reasonably acceptable to the Lessee (which opinion shall be reasonably satisfactory in form and substance to the Owner Participant and the Lessor) that it will suffer no adverse tax consequences not otherwise indemnified for as of the effective date of this Agreement as a result of such substitution or (B) an indemnity reasonably acceptable to the Lessor and the Owner Participant against such consequences, which indemnity shall be bonded or otherwise secured to the reasonable satisfaction of the Lessor and the Owner Participant; (vi) comply with the provisions of Section 9.08 of the Indenture; (vii) cause an Indenture and Security Agreement Supplement with respect to such Replacement Engine to be duly executed by the Lessor and the Indenture Trustee and recorded pursuant to the Transportation Code, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 6.03(b) of the Participation Agreement in order that the Indenture shall constitute a first priority duly perfected Lien and security interest on and in respect of such Replacement Engine; (viii) take such other action, including the filing of UCC financing statements naming the Indenture Trustee as Secured Party with the Secretary of State of Connecticut and a notice filing with the Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly titled in the Lessor, leased under this Lease and subjected to the Lien of the Indenture to the same extent as the replaced Engine; (ix) furnish the Lessor, the Owner Participant and the Indenture Trustee with an opinion (reasonably satisfactory in form and substance to the Lessor, the Owner Participant and the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's General Counsel) addressed to the Lessor, the Indenture Trustee and the Owner Participant to the effect that (A) the Lessor has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of the Indenture (with the effect and result that the Indenture constitutes a first priority duly perfected security interest and Lien on such Replacement Engine); and (x) take such other action as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of the Indenture to the same extent as the replaced Engine. (c) Title Transfer. Upon compliance by the Lessee with the terms of Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee (subject to any insurer's salvage rights), without recourse or warranty (except as to the absence of Lessor's Liens), all of the Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, the Lessee shall prepare and the Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents as the Lessee reasonably requests, all at the Lessee's sole cost and expense. Each Replacement Engine shall, after such conveyance, be deemed part of the property leased under this Lease. An Event of Loss covered by this Section 11.04 shall not result in any change in Basic Rent, Stipulated Loss Values or Termination Values, but may result in payments to be made pursuant to the Tax Indemnity Agreement and the Participation Agreement. Section 11.05. Application of Payments from the Government or Others. (a) Generally. Any payments (other than insurance proceeds the application of which is provided for in Section 13.03 hereof) received at any time by the Lessor or by the Lessee from any governmental authority or any other party, foreign or domestic, with respect to an Event of Loss resulting from the condemnation, confiscation, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied, as appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof. (b) Payments of Stipulated Loss Value. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.02 hereof, so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or, if the Lien of the Indenture has not been discharged, the Indenture Trustee) in reduction of the Lessee's obligations under Section 11.02 hereof if not already paid by the Lessee, or, if such obligations have already been discharged in full by the Lessee, such payments shall be applied to reimburse the Lessee for its payment of such Stipulated Loss Value and, if and to the extent specifically included in such payment, to pay to the Lessee interest on such amount of Stipulated Loss Value at the rate included in such payment if any, or otherwise at the applicable Debt Rate, for the period from the date of payment by the Lessee of the Stipulated Loss Value to the date of reimbursement of the Lessee under this Section 11.05(b). The excess, if any, remaining after such application shall be divided between the Lessor and the Lessee as their respective interests may appear. (c) Payment if the Lessee Elects Replacement. If the payments described in Section 11.05(a) hereof are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such payments are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations pursuant to Section 11.03 or Section 11.04 hereof, as the case may be, with respect to the Event of Loss for which such payments are made. Section 11.06. Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality of either (a "Requisitioning Government") of the Airframe and the Engines or engines then installed on the Airframe during the Term, which requisition does not constitute an Event of Loss, the Lessee shall promptly notify the Lessor, the Indenture Trustee and the Owner Participant of such requisition and all of the Lessee's obligations under this Lease with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred except to the extent that any failure or delay in the performance or observance of such obligations (other than obligations for the payment of Rent and, subject to Section 7.01(f) hereof, the maintenance of required insurance) by the Lessee shall have been caused by such requisition. All payments received by the Lessor, the Lessee or any permitted sublessee or transferee from the Requisitioning Government for such use of the Airframe and Engines or engines during the Term (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 11.05 hereof shall govern) shall, subject to Section 11.08 hereof, be paid over to, or retained by the Lessee or such permitted sublessee or transferee unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing (in which case such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by the Lessor, the Lessee or any such permitted sublessee or transferee from the Requisitioning Government for the use of the Airframe and Engines or engines after the Term shall be paid over to, or retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's interest therein in accordance with the provisions hereof). In the event of any such requisition for use, the Lessee agrees to use reasonable efforts to obtain reimbursement from the Requisitioning Government to the Lessor for damages suffered by the Lessor and the Owner Participant as a result of such requisition for use. The Lessee will endeavor to keep the Lessor informed as to any negotiations between the Lessee and/or any permitted sublessee or transferee and a Requisitioning Government with respect to any such requisition and will consult with the Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by the Lessor and the Owner Participant by reason of such requisition for use. Section 11.07. Requisition for Use by Government of an Engine Not Installed on the Airframe. In the event of the requisition for use by a Requisitioning Government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Lessee shall replace such Engine by complying with the terms of Section 11.04 hereof to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition, and any payments received by the Lessor or the Lessee from the Requisitioning Government with respect to such requisition shall, subject to Section 11.08 hereof, be paid over to or retained by the Lessee, provided that the Lessee shall have fully performed its obligations under Section 11.04 hereof. Section 11.08. Application of Payments During Existence of Certain Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof which is payable to the Lessee shall not be paid to the Lessee, or, if it has been previously paid directly to the Lessee, shall not be retained by the Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lessor (or the Indenture Trustee so long as the Lien of the Indenture is in effect) as provided in Article 23 hereof as security for the obligations of the Lessee under this Agreement, and at such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount to the extent not theretofore applied as provided herein, shall be paid to the Lessee. ARTICLE 12 RETURN OF AIRCRAFT Section 12.01. Return of Aircraft. Unless the Aircraft is purchased by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or upon the termination of this Lease pursuant to Article 10 or Article 17 hereof or otherwise, the Lessee, at its own cost and expense, will return the Aircraft by delivering it to the Lessor on the last day of the Term or on the Termination Date, as the case may be, at the Lessee's principal maintenance facility in Memphis, Tennessee or such other location specified by the Lessor pursuant to the next succeeding sentence (and reasonably acceptable to the Lessee), within the continental United States (on the Lessee's route structure as in effect on the return date) and the Airframe shall be fully equipped with two Engines of the same or an improved make and model as were delivered on the Delivery Date (or Replacement Engines), free and clear of all Liens (other than Lessor's Liens), including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements, it being understood that all such Engines and Replacement Engines so returned shall be of identical make and model and that any Replacement Engine shall be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder. The Lessor will give the Lessee at least thirty (30) (or five (5) in the case of a return pursuant to Article 17 hereof) days' prior written notice of the place of such return; provided, however, that if the Lessor shall have made the request for storage pursuant to Section 12.06 hereof, the Lessee shall return the Aircraft to the Lessor at the site of the storage and provided further that if notice is not delivered the Aircraft shall be returned in Memphis, Tennessee. Section 12.02. Return of Engines. If any engine not owned by the Lessor shall be delivered with the Airframe as set forth in Section 12.01 hereof, the Lessee, concurrently with such delivery, will, at its own cost and expense furnish the Lessor with (i) a full warranty bill of sale, in form and substance reasonably satisfactory to the Lessor, with respect to such engine, (ii) an opinion of the Lessee's counsel to the effect that, upon such return, the Lessor will acquire full right, title and interest to such engine free and clear of all Liens (other than Lessor's Liens) and (iii) a certificate as described in Section 11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor may reasonably request in order that such Replacement Engine shall be duly and properly titled in the Lessor free and clear of all Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to the Lessee, without recourse or warranty (except as to the absence of Lessor's Liens), and subject to the disclaimers provided in Section 5.01 hereof, all the Lessor's right, title and interest in and to any Engine in lieu of which a Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver to the Lessee such instrument as the Lessor shall have received from the Indenture Trustee, releasing such Engine from the Lien of the Indenture. Section 12.03. Return of Manuals. Upon the return of the Aircraft, the Lessee shall deliver to the Lessor all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) logs, manuals (including, any service kits previously furnished by a manufacturer at no cost to the Lessee), certificates and technical data, and inspection, modification and overhaul records pertaining to the Airframe, Engines or engines, which are required to be maintained under applicable rules and regulations of the Aeronautics Authority or pursuant to the Lessee's or any permitted sublessee's Aeronautics Authority-approved maintenance program or which the Lessee would otherwise discard upon such return and all original (or photocopied or microfilmed copies thereof, if then permitted to be maintained in such form under applicable law) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. All records shall be returned in the format necessary to allow the Lessee or any sublessee to comply with Section 12.04(a)(i) hereof. Section 12.04. Condition of Aircraft. (a) Required Condition. The Aircraft when returned to the Lessor shall, at the Lessee's own cost and expense, meet the following requirements: (i) it shall, unless otherwise requested by the Lessor not less than 90 days prior to the end of the Term to retain the then-existing registration of the Aircraft, be duly registered in the name of the Lessor or its designee pursuant to the Transportation Code; (ii) it shall be clean by airline and cargo handling operating standards; (iii) the Airframe shall be returned with the Engines, or any replacements thereto as herein authorized, provided that the Airframe shall have an aggregate of two Engines or engines (as herein authorized under Section 12.02 hereof), both of the same make and model, installed thereon, together with the equipment, accessories or parts installed thereon on the Delivery Date or replacements therefor (as herein authorized) and alterations, modifications and additions thereto made in accordance with the provisions of this Lease; (iv) it shall be in the condition required by Section 12.04(b) hereof and in as good operating condition as when delivered to the Lessor on the Delivery Date, ordinary wear and tear excepted; (v) it shall have a currently effective airworthiness certificate issued by the Aeronautics Authority; (vi) it shall comply with any then applicable rules and regulations imposed by the Aeronautics Authority and, without limitation of the foregoing, terminate all airworthiness directives of, and mandatory modifications required by, the Aeronautics Authority (or any government or governmental authority, domestic or foreign, having jurisdiction over the Aircraft) to be terminated during the Term of the Lease and each Engine (including any Replacement Engine) shall be serviceable in accordance with the Lessee's FAA-approved maintenance program; (vii) it shall be free and clear of all Liens and rights of others (other than Lessor's Liens) including, without limitation, rights of third parties under pooling, interchange, overhaul, repair and other similar agreements or arrangements referred to in Section 7.02(a) hereof; and (viii) it shall be in a standard cargo configuration. (b) Remaining Time. If, at the time of return of the Aircraft, the Airframe is not being maintained under a continuous maintenance program, then the Airframe shall have remaining until the next scheduled "C" check at least 25% of the allowable hours between "C" checks permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Airframe is subject to a continuous maintenance program, there will be no time-before-overhaul requirement. If, at the time of return of the Aircraft, the Engines are not being maintained under an on-condition maintenance program, then the average number of hours on such Engines remaining until the next scheduled engine heavy maintenance visit shall be at least 25% of the allowable hours between engine heavy maintenance visits permitted under the Lessee's FAA-approved maintenance program. If, at the time of return of the Aircraft, the Engines are subject to an on-condition maintenance program, there will be no time-before-overhaul requirement. With respect to maintenance under the Lessee's FAA-approved maintenance program, the Lessee shall have treated the Aircraft in a nondiscriminatory manner with other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall be free and clear of all Liens and rights of others other than Lessor's Liens and shall be in compliance in every material respect with the Lessee's maintenance program as if the Term were not ending. Section 12.05. Delayed Return of Aircraft. (a) If the return of the Aircraft to the Lessor in compliance with the terms of this Lease shall be delayed beyond the scheduled end of the Term because of the occurrence of an event described in clause (iii)(2)(B) of the definition of Event of Loss, this Lease shall not terminate but shall continue in full force and effect until the expiration of the six-month period (or, so long as the Lessor shall have received at least six month's notice of the date on which such shorter period ends, such shorter period referred to in said clause (iii)(2)(B)) after the scheduled end of the Term, provided that (i) Stipulated Loss Value and Termination Value during such extension shall be an amount determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand, as Basic Rent for each day of such delay and this Lease shall continue, an amount equal to the daily equivalent of the average Basic Rent paid during the Basic Term and any then expiring Renewal Term, or such higher compensation being paid by the Government pursuant to the CRAF Program and (iii) neither the Lessee nor any other Person shall use or operate the Aircraft in any manner, except pursuant to the activation of such CRAF Program. (b) In any other situation in which the Aircraft is not returned to the Lessor upon the expiration of the Term (other than due to a purchase of the Aircraft by the Lessee pursuant to this Lease or by a purchaser under Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day of such delay an amount equal to the Rent per diem at a rate equal to the Fair Market Rental and this Lease shall continue for up to six (6) months after the end of the Term; provided, however, that nothing in this paragraph shall be deemed (i) to relieve the Lessee in any respect from any Default or Event of Default or claims with respect thereto arising from the failure to return the Aircraft at the time or in the condition required by the Operative Agreements or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft otherwise than in connection with effecting such return. Section 12.06. Storage. Upon any expiration or termination of this Lease, at the written request of the Lessor given at least 15 days prior to such expiration or termination, the Lessee will arrange, or will cause to be arranged, at no charge to the Lessor (subject, however, to the last sentence of this Section 12.06), storage at a ramp storage facility for the Aircraft at the Lessee's principal maintenance facilities in Memphis, Tennessee or one of the Lessee's other maintenance facilities or at a location selected by the Lessee used as a location for the parking or storage of aircraft for a period of up to 30 days; provided that if storage is available at no additional cost or expense to the Lessee at the location at which the Lessor has specified pursuant to Section 12.01 hereof that return of the Aircraft shall take place, the Lessee shall provide storage at such location. At the end of such 30 day period, if the Lessor so requests within 10 days of before the end of such period, the Lessee will continue to provide such ramp storage facility at such facility or location for an additional 30 days at the Lessor's expense. If the Lessee is required to move the Aircraft from one storage facility to another, such move shall be at the risk and expense of the Lessor. The maintenance and risk of loss of, and responsibility for obtaining insurance on, the Aircraft shall be the responsibility of the Lessor during any period of storage; provided, however, the Lessee will, upon written request of the Lessor and at the Lessor's expense, not to exceed the Lessee's incremental cost of such service, obtain insurance for such property (including, if possible, coverage through its fleet policy). Section 12.07. Special Markings. If requested by the Lessor, the Lessee shall, at the Lessee's cost, remove or paint over all insignias and other distinctive markings of the Lessee or any sublessee on the Aircraft and repaint the stripped down areas in a workmanlike manner to match exterior colors. Section 12.08. Lessor's Option to Purchase Parts. At any time after the Lessee has advised the Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee intends, and is permitted, to remove as provided in Section 9.02(b) above, and the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase any or all of such Parts from the Lessee upon the expiration of the Term at their then Fair Market Value determined in accordance with the provisions of Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does not elect to exercise its option under this Section 12.08, the Lessee will, at its own cost and expense, remove such Parts described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the Lessor may request. ARTICLE 13 INSURANCE Section 13.01. Comprehensive Airline Liability and Property Damage Liability Insurance. (a) Comprehensive Airline Liability and Property Damage Liability Insurance. The Lessee, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive airline liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Lessee customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Lessee (subject to the limitations set forth in Section 13.06 hereof), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Lessee and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that in no event shall the limits of liability for all comprehensive airline liability insurance be less than the amount, per occurrence, as set forth on the insurance certificate delivered on the Delivery Date unless and only so long as the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. The Lessee will also be required to maintain war risk insurance if the Aircraft is operated in a war zone if such insurance is available on commercially reasonable terms and if it is the custom for major international Air Carriers flying comparable routes to carry such insurance. (b) Government Indemnification. Notwithstanding Section 13.01(a) hereof, in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Lessee shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 13.01; provided that the Lessor shall accept, in lieu of such insurance coverage, written indemnification or insurance from the Government which is substantially the same as otherwise required under this Article 13. (c) Policy Terms. Any policy of insurance carried and maintained in accordance with this Section 13.01, and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft, the Indenture Trustee in its individual capacity and as trustee/mortgagee of the Aircraft, each Liquidity Provider and the Owner Participant and each of their respective officers and directors in their respective capacities as such as additional insureds (hereinafter in this paragraph (c) sometimes referred to as "Additional Insured"); (ii) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or any Additional Insured as defined under the policy of insurance required under this Section 13.01 (other than any action or inaction of such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or any other Additional Insured (other than any breach or violation of any warranty, declaration or condition by such Additional Insured) as defined under the policy of insurance required under this Section 13.01; (iii) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers or such insurers' broker of such cancellation, change or lapse; (iv) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Lessee has waived its rights under this Lease and the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (v) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided, that such policies shall not operate to increase any insurer's limit of liability; (vi) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft; (vii) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (viii) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured. Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 13.06 hereof) and in such form, upon such terms and conditions (including coverage for cost of claims), and in amounts as the Lessee customarily maintains with respect to the aircraft in the Lessee's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Lessee shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to this Lease and the Lien of the Indenture be on an agreed-value basis for an amount not less than an amount equal to the Stipulated Loss Value for the relevant period for the Aircraft as set forth on Schedule III to this Lease. (b) Policy Terms. Any policies carried and maintained in accordance with this Section 13.02 and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (i) name or be amended to name the Lessor in its individual capacity and as owner of the Aircraft (or, so long as the Indenture shall not have been discharged, the Indenture Trustee) as an additional insured and as the sole loss payee (hereinafter in this paragraph (b) sometimes referred to as "Loss Payee"); (ii) provide with respect to coverage provided under this Section 13.02, that (i) in the event of a loss involving proceeds in the aggregate in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Stipulated Loss Value for the Aircraft shall be payable to the Lessor (or, so long as the Indenture shall not have been discharged, the Indenture Trustee), it being understood and agreed that in the case of any payment to the Lessor (or the Indenture Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall, unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to the Lessee or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or its order unless a Payment Default, a Bankruptcy Default or an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Lessor or the Indenture Trustee (and if the insurers have notice of a Payment Default, a Bankruptcy Default or an Event of Default, such payment shall be made to the Indenture Trustee); (iii) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affect the scope of the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (iv) provide that, in respect of the interest of the Lessor (in its individual capacity and as the Owner Trustee), the Owner Participant or the Indenture Trustee (in their respective capacities as such) in such policies, the insurance shall not be invalidated by any action or inaction of the Lessee or the Loss Payee (other than any action or inaction of such Loss Payee) and shall insure the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or the Loss Payee (other than any breach or violation of any warranty, declaration or condition by the Loss Payee) as defined under the policy of insurance required under this Section 13.02; (v) provide that the insurers shall waive any rights of subrogation against the Lessor (in its individual capacity and as Owner Trustee), the Owner Participant and the Indenture Trustee to the extent that the Lessee has waived its rights under this Lease or the Participation Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Lessee shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Lessee; (vi) be primary and without rights of contribution from any other insurance which is carried by the Loss Payee with respect to its interest in the Aircraft; (vii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Loss Payee; (viii) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines or spare parts, as the case may be) no Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; and (ix) in the event that separate policies are maintained to cover all-risk ground and flight aircraft, hull and war risks and allied perils insurance, include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by the Lessee with respect to all other aircraft in the Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Delivery Date shall be attached to the insurance certificate issued on the Delivery Date. Section 13.03. Application of Insurance Proceeds. (a) Generally. All insurance proceeds (other than proceeds from policies carried by the Lessor, the Indenture Trustee or the Owner Participant) received under policies described in Section 13.02 hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (i) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected or is deemed to have elected the alternative set forth in Section 11.02 hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Lessee pursuant to said Section 11.02 hereof shall be applied in reduction of the Lessee's obligation to pay such amounts if not already paid by the Lessee, or if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amounts, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining will be paid to the order of the Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement; or (ii) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Lessee has elected the alternative set forth in Section 11.03 hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 11.04 hereof, all such proceeds shall be paid to the Indenture Trustee (unless the Indenture has been discharged in which case paid to the Lessor) for disbursement to the order of the Lessee, after the Lessee shall have fully performed the terms of Section 11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for which such proceeds are paid, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (b) Payment if no Event of Loss. The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Lessee) for repairs or for replacement property in accordance with Articles 7 and 8 hereof, if not already paid for by the Lessee, and any balance remaining after compliance with said Articles 7 and 8 hereof with respect to such loss shall be paid to the order of the Lessee, provided that no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as security for the Lessee's obligations hereunder and under the Participation Agreement. (c) Information. If any Additional Insured becomes subject to any claim covered by any insurance policy maintained pursuant to this Article 13, the Lessee shall make available any information required by such Additional Insured in connection with such claim. Section 13.04. Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy during the Term, the Lessee shall cause an aviation insurance broker to furnish to the Lessor and the Indenture Trustee a signed report, stating in reasonable detail the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Lease. The Lessee will cause its aviation insurance broker to advise the Lessor, the Owner Participant and the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Lessee of which it has knowledge and which might invalidate, cause cancellation of or render unenforceable all or any part of any insurance carried by the Lessee with respect to the Aircraft. The Lessee will cause such insurance broker to agree to advise the Lessor, the Indenture Trustee and the Owner Participant in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Article 13 will not be renewed at the expiration date. If the Lessee shall fail to maintain insurance as required, the Lessor may, at its option, provide such insurance, and in such event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Lease, including the provisions that failure by the Lessee to maintain the prescribed insurance shall constitute an Event of Default or otherwise constitute a waiver of any other rights the Lessor may have against the Lessee. Section 13.05. Lessor's Insurance. The Lessor, the Indenture Trustee or the Owner Participant may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Stipulated Loss Value of the Aircraft, provided that any insurance so maintained by the Lessor, the Indenture Trustee or the Owner Participant shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Lessee under this Article 13 or increase the cost to the Lessee of maintaining such insurance; provided further, that any insurance policies of the Lessor, the Indenture Trustee or the Owner Participant insuring the Airframe or any Engine shall provide for a release to the Lessee of any and all salvage rights in and to the Airframe or any Engine. Section 13.06. Self-Insurance. The Lessee may self-insure the risks required to be insured against by Sections 13.01 and 13.02 hereof in such reasonable amounts as are then applicable to other aircraft or engines of the Lessee of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Lessee's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Lessee's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Lessee's entire aircraft fleet provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The foregoing shall not permit the Lessee to discriminate as between insurance coverage on the Aircraft and insurance which the Lessee maintains with respect to similar aircraft owned or operated by the Lessee operating on similar routes in similar locations. ARTICLE 14 INSPECTION Section 14.01. Right of Inspection. At reasonable times, and upon at least five (5) Business Days' prior written notice to the Lessee, the Lessor, the Indenture Trustee or the Owner Participant, or their respective authorized representatives, may inspect the Aircraft and upon at least ten (10) Business Days' prior written notice, all Aeronautics Authority required books and records of the Lessee and any sublessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except to a Person described in Section 18.01 of the Participation Agreement. Any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Lessee (except to the extent any such inspection takes place when any such panel, bays or the like are open). Notwithstanding the previous sentence, unless a Payment Default, Bankruptcy Default, material Default relating to maintenance (without giving effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner Participant or their respective authorized representatives shall each be entitled to inspect the Aircraft only one time during any consecutive twelve-month period. If following any reregistration of the Aircraft, the Aircraft is located outside the United States at the time of a proposed inspection, the Lessee shall have thirty (30) days to relocate the Aircraft within the United States and, if unable to do so within such time period, shall pay the reasonable incremental out-of-pocket costs of the Lessor, the Owner Participant or their authorized representatives incurred in connection with any such inspection outside the United States. The Lessee shall make any permitted sublease or transfer permitted under Section 7.02 hereof expressly subject to inspection rights consistent with this Article 14. The Lessee agrees to respond in a timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the Owner Participant's inquiries regarding (x) the location of the Aircraft or any Engine or (y) the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft (at which representatives of the Owner Participant, the Lessor or the Indenture Trustee may be present without regard to the one-year limitation set forth above). Section 14.02. No Obligation to Inspect. None of the Lessor, the Indenture Trustee or the Owner Participant shall have any duty to make any inspection pursuant to Section 14.01 hereof and no such party shall incur any liability or obligation by reason of making or not making any such inspection. ARTICLE 15 ASSIGNMENT Section 15.01. Lessee's Right to Assign. The Lessee shall not, and shall have no authority or power to assign, convey or sublease any of its rights under this Lease without the prior written consent of the Lessor except (i) as expressly provided in Section 7.02 hereof, or in the case of any requisition by the Government referred to in Section 7.01 of this Lease, or (ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any such assignment, conveyance or sublease shall in no way relieve the Lessee from any obligation hereunder or under any other Operative Agreement or any written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements, which shall be and remain obligations of the Lessee. The Lessor agrees that it will not assign or convey its right, title and interest in and to this Lease or the Aircraft except as contemplated by or provided in this Lease, the Trust Agreement, the Indenture or the Participation Agreement. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the Lessor and the Lessee and their respective successors and permitted assigns, and shall inure, to the extent expressly provided herein and therein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their respective successors and permitted assigns. Section 15.02. Citizenship. The Lessee will at all times be a duly certificated U.S. Air Carrier under the Transportation Code. ARTICLE 16 EVENTS OF DEFAULT Section 16.01. Events of Default. After the Delivery Date, each of the following events shall constitute an Event of Default, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body: (a) the Lessee shall fail to make any payment of Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value, as the case may be, or any payment pursuant to Section 17.02 of the Participation Agreement, within ten Business Days after the date when due (except that with respect to any failure to pay Excepted Payments, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (b) the Lessee shall fail to make any payment of Supplemental Rent (other than amounts described in clause (a) above) within 30 days after the Lessee has received written notice from the Person entitled to receive such payment stating that such payment is due (except that with respect to any failure to pay Excepted Payments for such period, such failure shall constitute an Event of Default at the discretion of the Owner Participant); or (c) (i) the Lessee shall fail to procure, carry and maintain insurance on or in respect of the Aircraft at any time in accordance with the provisions of Article 13 or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of (A) 20 days (or seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by any Additional Insured of written notice of such lapse or cancellation and (B) the date that such lapse or cancellation is effective as to any Additional Insured and provided further that such failure shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated, or (ii) the Aircraft shall be operated at any time when comprehensive airline liability insurance required under Section 13.01 hereof shall not be in effect (it being understood that the Lessee is not required to maintain such insurance under Section 13.01 hereof while the indemnification or insurance referred to in the proviso to Section 13.01(b) hereof is in effect); or (d) the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Operative Agreement (excluding the Tax Indemnity Agreement) or any other written agreement of the Lessee entered into in connection with the transactions contemplated by the Operative Agreements and such failure shall continue unremedied for a period of thirty (30) days after the date a Responsible Officer of the Lessee has actual knowledge of the failure or the Lessee shall have received written notice from the Lessor or the Owner Participant of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the earlier of actual knowledge of a Responsible Officer of the Lessee or notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, such failure shall not constitute an Event of Default; provided, further, that failure of the Lessee to maintain the registration of the Aircraft under the Transportation Code pursuant to the Lessee's covenants and agreement in Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of this Lease, when the lapse of such registration is solely because the Owner Participant or the Lessor has ceased to be a Citizen of the United States, shall not constitute a Default or an Event of Default; or (e) an order for relief shall be entered in respect of the Lessee by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Lessee shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Lessee is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Lessee in any such proceeding; or the Lessee shall file, or the Board of Directors of the Lessee shall authorize the Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Lessee, a custodian, receiver, trustee, or liquidator of the Lessee or of any substantial part of its property, or sequestering any substantial part of the property of the Lessee, or granting any other relief in respect of the Lessee under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of ninety (90) days after the date of its entry; or (g) a petition against the Lessee in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (h) any representation or warranty made by the Lessee in this Lease or in the Participation Agreement or in any document or certificate furnished by the Lessee in connection with or pursuant to this Lease or the Participation Agreement (except for the Tax Indemnity Agreement) shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Lease and, if originally made by the Lessee in good faith, shall remain material and unremedied for a period of thirty (30) days after a Responsible Officer of the Lessee shall have actual knowledge or the Lessee shall have received written notice of such misstatement. ARTICLE 17 REMEDIES Section 17.01. Remedies Upon Lessee's Default. (a) Remedies Generally. Upon the occurrence of any Event of Default and at any time after such occurrence so long as the same shall be continuing, the Lessor may, at its option, declare this Lease to be in default (except that no such declaration shall be required in the case of an Event of Default pursuant to paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be deemed declared in default without any further act or notice), and at any time thereafter the Lessor may do, and the Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as the Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with, any mandatory requirements of applicable law then in effect: (i) Demand in writing that the Lessee shall, and upon such written demand the Lessee shall, at the Lessee's own cost and expense, return promptly to the Lessor all or such part of the Airframe and the Engines as the Lessor may demand in the manner and condition required by, and otherwise in accordance with all of the provisions of this Lease (provided that, unless the Lessor shall require otherwise, the Aircraft shall be returned within the continental United States), or the Lessor, at its option, may enter upon the premises where such Airframe or Engines are located or believed to be located and take immediate possession of and remove such Airframe and Engines (together with any engine which is not an Engine but is installed on the Airframe, subject to all of the rights of the owner, lessor, Lien holder or secured party of such engine) without the necessity for first instituting proceedings, or by summary proceedings or otherwise, all without liability of the Lessor to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such action or otherwise; (ii) With or without taking possession thereof, sell or otherwise dispose of the Airframe or any Engine, at public or private sale and with or without advertisement or notice to the Lessee, as the Lessor may determine, and the Lessor may hold the Lessee liable for any installment of Basic Rent and Renewal Rent due on or before the date of such sale (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the immediately preceding Rent Payment Date to the date of such sale), or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as the Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of the Lessee except as otherwise set forth in this Article 17, and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds except to the extent required by Section 17.01(a)(iv) hereof; in the event the Lessor elects to exercise its rights under said Section, and in connection with any sale of the Aircraft or any part thereof pursuant to this Article 17, the Lessor, the Indenture Trustee, the Owner Participant or any Holder may bid for and purchase such property; (iii) Whether or not the Lessor shall have exercised or shall later at any time exercise any of its rights under Section 17.01(a)(i) or 17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying a payment date not earlier than 10 days from the date of such notice, may demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due on Rent Payment Dates occurring after the payment date specified in such notice), any installment of Basic Rent, Renewal Rent and any Supplemental Rent due on or before such payment date (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of the period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such payment), plus an amount equal to the excess, if any, of the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date on or next preceding the payment date specified in such notice over the Fair Market Value of the Aircraft, computed as of such Stipulated Loss Value Determination Date, together with (A), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on the amount of such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date for payment set forth in such notice from the Lessor and (B) in all cases, interest, to the extent permitted by applicable law at the Past Due Rate on the excess of such Stipulated Loss Value over such Fair Market Value, from the date as of which such Stipulated Loss Value is payable to the date of actual payment of such amount; provided, however, that if (and in any event prior to the time for payment hereunder) the Lessor is unable within a reasonable period of time to recover possession of the Aircraft, or any portion thereof, pursuant to clause (i) above unencumbered by this Lease and free and clear of all Liens (other than Lessor's Liens), the Fair Market Value of the Aircraft or such portion shall, at the option of the Lessor to the extent legally enforceable, be zero and, if the Fair Market Value of the Aircraft is deemed to be zero, after payment in full by the Lessee of the amount specified above and all other amounts due from the Lessee under this Lease and the other Operative Agreements, the Lessor shall promptly transfer (without recourse or warranty other than as to the absence of the Lessor's Liens) all of its right, title and interest in the Aircraft or such portion, to the Lessee; (iv) In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu of exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent due after the date on which such sale occurs) any unpaid Basic Rent or Renewal Rent due on or before the date on which such sale occurs (and, if Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of the installment of Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in respect of any period commencing on the Stipulated Loss Value Determination Date referred to below and ending on the date of such sale), and any Supplemental Rent due on or before the date on which such sale occurs, plus an amount equal to the excess, if any, of (A) the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss Value Determination Date next preceding the sale date, over (B) the net proceeds of such sale (after deduction of all of the Lessor's costs and expenses of such sale, including, without limitation, sales or transfer taxes, costs of storage, overhaul, maintenance, preparation and transportation of the Aircraft and brokers' and attorneys' fees) together with (x), if Basic Rent is payable in advance, interest, to the extent permitted by applicable law, at the Debt Rate on such Stipulated Loss Value from such Stipulated Loss Value Determination Date to the date of such sale and (y) in all cases, interest to the extent permitted by applicable law at the Past Due Rate, on the amount of such excess from the date of such sale to the date of actual payment by the Lessee; (v) Proceed by appropriate court action to enforce the terms of this Lease or to recover damages for its breach; (vi) Terminate or rescind this Lease as to the Airframe or any or all of the Engines; or (vii) Exercise any other right or remedy which may be available to the Lessor under applicable law. (b) Cost of Exercise of Remedies. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due before, after or during the exercise of any of the Lessor's remedies, for all amounts payable by the Lessee under the Participation Agreement before or after any termination hereof, and for all reasonable legal fees and other costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor's remedies, including, without limitation, all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Article 12 hereof or in placing the Airframe or Engines in the condition and state of airworthiness required by such Article or in connection with any inspection, use, operation, maintenance, insurance, storage, or leasing carried out as part of such exercise. Section 17.02. Cumulative Remedies. Except as otherwise provided, no remedy referred to in this Article 17 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Lessor at law or in equity; and the exercise or beginning of exercise by the Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Lessor of any or all of such other remedies. Section 17.03. Waiver. No express or implied waiver by the Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. To the extent permitted by applicable law, the Lessee waives any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Airframe or any Engine in mitigation of the Lessor's damages or which may otherwise limit or modify any of the Lessor's rights or remedies under this Article 17. The Lessor's access to the Aircraft is of the essence and shall not be impaired. Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee fails to make any required payment of Rent or fails to perform or comply with any of its agreements contained in this Lease, whether or not such failure shall constitute an Event of Default hereunder, the Lessor may (but shall not be obligated to) make such payments or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable costs and expenses of the Lessor incurred in connection with such payment or the performance of or compliance with such agreement, together with interest (to the extent permitted by applicable law) at the Past Due Rate from the date of the making of such payment or the incurring of such costs and expenses by the Lessor to the date of payment of such Rent or other amount by the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon demand. No such payment or performance by the Lessor shall be deemed to waive any Default or Event of Default or relieve the Lessee of its obligations hereunder. ARTICLE 18 COVENANT OF QUIET ENJOYMENT Section 18.01. Quiet Enjoyment. So long as no Event of Default shall have occurred and be continuing, the Lessor covenants that neither it nor any other Person lawfully claiming through it (other than the holder of a Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof, and it being understood that the Lessor shall not be liable for any act or omission of the Indenture Trustee or any other Person claiming through the Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the Aircraft without hindrance or disturbance by it or any such other Person. ARTICLE 19 FURTHER ASSURANCES Section 19.01. Further Assurances. Promptly upon the execution and delivery of the Lease Supplement and the Indenture and Security Agreement Supplement, the Lessee will cause each of them and this Lease, the Trust Agreement and the Indenture, to be duly filed for recordation in accordance with the Transportation Code and will maintain the recordation of the Indenture until the Lien of the Indenture shall have been discharged pursuant to the terms of the Indenture. In addition, the Lessee will, at the Lessee's own cost and expense, promptly and duly execute and deliver to the Lessor, the Owner Participant and the Indenture Trustee such further documents and assurances to carry out the intent and purpose of this Lease and the Indenture and to establish and protect the rights and remedies created or intended to be created in favor of the Lessor under this Lease, and of the Owner Participant under the Trust Agreement, and of the Indenture Trustee under the Indenture, including, without limitation, the execution and filing of UCC financing and continuation statements, the execution and delivery of supplements and amendments to this Lease and the Indenture, in recordable form, subjecting to this Lease and the Indenture any Replacement Airframe and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03 hereof and any Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof and the recording and filing of counterparts of this Lease and the Indenture in accordance with the laws of such jurisdictions as the Lessor or the Indenture Trustee may from time to time deem advisable. The foregoing does not impose upon the Lessor any additional liabilities not otherwise contemplated by this Lease. ARTICLE 20 NET LEASE Section 20.01. Nature of Lease. (a) This Lease is a net lease, it being the intention of the parties hereto that the obligations of the Lessee to pay all costs and expenses of every character, whether seen or unforeseen, ordinary or extraordinary, or structural or nonstructural, in connection with the use, operation, maintenance, repair and reconstruction of the Airframe and each Engine by the Lessee, including, without limitation, the costs and expenses particularly set forth in this Lease (unless expressly excluded from the terms hereof, the costs and expenses of the Lessor and the Owner Participant shall include the reasonable fees and expenses of their respective outside counsel), shall be absolute and unconditional, shall be separate and independent covenants and agreements, and shall continue unaffected unless and until the covenants have been terminated pursuant to an express provision of this Lease. The obligation to pay Rent and all amounts payable by the Lessee under this Lease or the Participation Agreement shall be absolute and unconditional and (except as otherwise expressly provided with respect to Supplemental Rent) shall be paid without notice or demand and such obligation shall not be affected by any circumstance, including, without limitation: (i) any set-off, counterclaim, recoupment, defense or other right which the Lessee may have against the Lessor, the Owner Participant, any Holder, the Indenture Trustee or anyone else for any reason (including, without limitation, any breach by the Lessor or the Owner Participant or the Indenture Trustee or any Holder of their respective representations, warranties, agreements or covenants contained in any of the Operative Agreements); (ii) any defect in the title, airworthiness, registration, eligibility for registration under the Transportation Code (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, merchantability or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft or any portion thereof, or any interruption or cessation in the use or possession of the Aircraft by the Lessee or any sublessee for any reason including, without limitation, by reason of governmental action or any doctrine of force majeure or impossibility of performance; (iii) any insolvency, bankruptcy, reorganization or similar case or proceedings by or against the Lessor, the Lessee, the Indenture Trustee or the Owner Participant or any other Person; (iv) any Liens, encumbrances or rights of any other Person with respect to the Aircraft, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any other Operative Agreement or document or instrument executed pursuant hereto or thereto, or any lack of right, power or authority of the Lessor or the Lessee or any sublessee or any other party to any other Operative Agreement to enter into this Lease or any other Operative Agreement or any such document or instrument; or (v) any other circumstance, happening or event whatsoever, whether or not unforeseen, or similar to any of the foregoing. (b) To the extent permitted by applicable law, the Lessee waives any and all rights which it may now have or which at any time it may have conferred upon it, by statute or otherwise, to terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any Engine or part thereof, other than in accordance with the terms hereof. (c) Except as expressly provided herein, each payment of Rent made by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee will not seek to return nor to recover, abate, suspend, defer or reduce all or any part of any such payment of Rent from the Lessor or from the Indenture Trustee for any reason. ARTICLE 21 SUCCESSOR LESSOR Section 21.01. Successor Lessor. The Lessee agrees that in the case of the appointment of any successor trustee for the Lessor pursuant to the terms of the Participation Agreement, such successor trustee shall, upon written notice by such successor to the Lessee, succeed to all the rights, powers and title of the Lessor under this Lease and shall be deemed to be the Lessor and the owner of the Aircraft for all purposes of this Lease without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee's obligations. One such appointment and designation of a successor trustee shall not exhaust the right to appoint and designate a further successor trustee pursuant to the Participation Agreement, but such right may be exercised repeatedly so long as this Lease shall be in effect. ARTICLE 22 SECURITY FOR LESSOR'S OBLIGATIONS Section 22.01. Security for Lessor's Obligations to Holders. In order to secure the indebtedness evidenced by the Certificates, the Indenture provides among other things, for the assignment by the Lessor to the Indenture Trustee of this Lease and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment (subject to the reservations and conditions therein set forth) and the receipt of a copy of the Indenture. Section 22.02. [Reserved]. Section 22.03. Consent of Lessee to Assignment of Lease as Security. The Lessee hereby accepts and consents, pursuant to the terms of the Indenture, the Indenture Trustee's rights to receive payments (other than Excepted Payments not constituting Basic Rent) due under this Lease, the right to transfer or assign title to the Aircraft subject to this Lease, to make all waivers and agreements except as otherwise provided in the Indenture, to give all notices, consents and releases and to take all action upon the happening of a Default or Event of Default under this Lease (except as otherwise specifically provided in the Indenture), or to do any and all other things whatsoever which the Lessor is or may become entitled to do under this Lease (except as otherwise provided in the Indenture); all or any of which rights, obligations, benefits and interests may, pursuant to the terms of the Indenture, be reassigned or retransferred by the Indenture Trustee at any time and from time to time (except as otherwise provided in the Indenture); provided, however, that the Lessor, except to the extent, and for such time as, it is unable to do so by virtue of the Indenture, shall remain liable for the performance of all the terms, conditions, covenants and provisions for which it is obligated under this Lease notwithstanding such assignment. ARTICLE 23 SECURITY FUNDS Section 23.01. Investment of Security Funds. (a) Any amounts otherwise payable to the Lessee shall be held by the Lessor as security for, and may be applied by the Lessor against, the obligations of the Lessee under this Lease during such time as there shall have occurred and be continuing a Payment Default, Bankruptcy Default or Event of Default, and, at such times as there shall not be continuing a Payment Default, Bankruptcy Default or Event of Default, such amounts, net of any amounts which have been applied by the Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts which are held by the Lessor pending payment to the Lessee shall, until paid to the Lessee or applied against the Lessee's obligations hereunder, be invested by the Lessor, as directed from time to time, in writing (and in the absence of a written direction by the Lessee, the Lessor shall invest such monies in direct obligations of the United States of America), by the Lessee and at the expense and risk of the Lessee, in the following securities (which in the case of securities referred to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature within ninety (90) days of the date of purchase): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States (which may include the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof), having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's or S&P; or (iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization) (which may include commercial paper issued by the Owner Trustee or the Indenture Trustee in their respective individual capacities or any Affiliate thereof). (b) At any time any invested funds are distributed to the Lessee, there shall be promptly remitted to the Lessee any gain (including interest received) realized as the result of any investment pursuant to Section 23.01(a) hereof (net of any fees, commissions and other costs and expenses, if any, incurred by the Lessor in connection with such investment), unless a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing in which case such funds shall be applied in the same manner as the principal so invested. The Lessee shall be responsible for and will promptly pay to the Indenture Trustee or the Lessor, as the case may be, on demand, the amount of any loss realized as the result of any such investment (together with any fees, commissions and other costs and expenses, if any, incurred by the Indenture Trustee or the Lessor in connection with such investment), such amount to be disposed of in accordance with the terms of the Indenture or the Lease, as the case may be. ARTICLE 24 CONCERNING THE LESSOR Section 24.01. Lessor's Entry Into Lease. Except as expressly provided herein, the Lessor and the Lessee agree that this Lease is executed by SSB not individually but solely as Owner Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Owner Trustee, that each and all of the representations, undertakings and agreements by the Lessor herein are for the purpose and with the intention of binding only the Lessor's Estate, and that in no case whatsoever shall SSB be personally liable for any loss in respect of such representations, undertakings and agreements, that actions to be taken by the Lessor pursuant to its obligations hereunder may, in certain instances, be taken by the Lessor only upon specific authority of the Owner Participant that nothing herein contained shall be construed as creating any liability on SSB, individually or personally, to perform any covenant, either express or implied, herein, all such liability, if any, being expressly waived by the Lessee and by each and every Person now or hereafter claiming by, through or under the Lessee except with respect to the gross negligence or willful misconduct of SSB, and that so far as SSB, individually or personally is concerned, the Lessee and any Person claiming by, through or under the Lessee shall look solely to the Lessor's Estate for the performance by the Lessor of any of its obligations under this Lease; provided, that nothing in this Section 24.01 shall be construed to limit in scope or substance those representations and warranties of SSB in its individual capacity set forth in the Participation Agreement or the Trust Agreement. The term "Lessor" as used in this Lease shall include any trustee succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of the Lessor hereunder may be performed by the Owner Participant, and any such performance shall not be construed as revocation of the trust created by the Trust Agreement. Nothing contained in this Lease shall restrict the operation of the provisions of the Trust Agreement with respect to its revocation of the resignation or removal of the Owner Trustee hereunder. ARTICLE 25 NOTICES Section 25.01. Notices. All notices, demands, declarations and other communications required by this Lease shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, five Business Days after being deposited in the United States mail and (c) if given by FedEx service (or, if a Default or Event of Default shall have occurred and be continuing, by other comparable courier service), when received or personally delivered, addressed: (a) If to the Lessee, to its office at 2005 Corporate Avenue, Memphis, Tennessee 38132, Attention: Senior Vice President and Chief Financial Officer with a copy to Senior Vice President and General Counsel; telephone (901) 395-3388, facsimile (901) 395-4758; or at such other address as the Lessee shall from time to time designate in writing to the Lessor, the Indenture Trustee and the Owner Participant; (b) If to the Lessor or Owner Trustee, to its office at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to State Street Bank and Trust Company, Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department, telephone (617) 664-5526, facsimile (617) 664-5371; or to such other address as the Lessor shall from time to time designate in writing to the Lessee and the Indenture Trustee, with a copy to Owner Participant at the Owner Participant's address as provided in subsection (c) below; (c) If to the Owner Participant, in accordance with the Participation Agreement; (d) If to the Indenture Trustee, to its office at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as the Indenture Trustee shall from time to time designate in writing to the Lessor, the Lessee and the Owner Participant; and (e) If to Moody's, to its office at Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Corporate Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661; or to such other address as Moody's shall from time to time designate in writing to the Lessee. ARTICLE 26 MISCELLANEOUS Section 26.01. Section Headings and Captions. All article and section headings and captions used in this Lease are purely for convenience and shall not affect the interpretation of this Lease. Section 26.02. References. Any reference to a specific article or section number shall be interpreted as a reference to that article or section of this Lease unless otherwise expressly provided. Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN NEW YORK. Section 26.04. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 26.05. No Oral Modification. The terms and provisions of this Lease may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Any such change, waiver, discharge or termination is also subject to the provisions of Section 8.01 and Article XIII of the Indenture. Section 26.06. Agreement as Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 26.07. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease by signing any such counterpart. Section 26.08. Public Release of Information. Provided no Event of Default shall have occurred and be continuing, each party shall in each instance obtain the prior written approval of each party concerning the exact text and timing of news releases, articles and other informational releases to the public media concerning this Lease. ARTICLE 27 TRUE LEASE Section 27.01. Intent of the Parties. It is the intent of the parties to this Lease that for all purposes (including, without limitation, U.S. Federal income tax purposes) this Lease will be a true lease, and that this Lease conveys to the Lessee no right, title or interest in the Aircraft except as a lessee. Section 27.02. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Lease and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. Section 27.03. Finance Lease. This Lease is a "finance lease" within the meaning of Section 2-A--103(g) of the UCC. IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease to be duly executed as of the date first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: ______________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: _______________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease is hereby acknowledged on this __ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President SCHEDULE I DEFINITIONS (FEDERAL EXPRESS CORPORATION TRUST NO. N682FE) GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements (other than the Pass Through Agreement, the Series Supplements, the Intercreditor Agreement and the Liquidity Facilities) referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Additional Insured. As defined in Section 13.01(c)(i) of the Lease. Adjustment Date. The date of any increase or decrease in the principal amount of the Series C Certificates pursuant to Section 2.19 of the Indenture. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency located in the United States succeeding to the functions of any of the foregoing. Affidavits. The affidavits of citizenship of the Owner Trustee and the Owner Participant. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean 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. In no event shall the Owner Trustee or the Lessor be deemed an Affiliate of the Owner Participant and SSB shall not be deemed to be an Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person (the "Original Payment") shall be supplemented by a further payment to such Person so that the sum of the two payments shall be equal to the Original Payment, after taking into account (x) all Taxes that would result from the receipt or accrual of such payments and (y) any reduction in Taxes that would result from such increased Taxes. In the case of amounts payable to the Lessor, the Owner Participant, or any corporate Affiliate of the Owner Participant, it shall be presumed that such Person is at all times subject to Federal income tax at the maximum marginal rate generally applicable to corporations from time to time and actual state, local and foreign income taxes. Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as defined in the Transportation Code) as to which there is in force a permit granted under Section 41302 of the Transportation Code. Airbus Guaranty. The Guaranty to be dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as provided in the Participation Agreement and to be leased under the Lease (or any permitted substitute airframe thereunder) together with two Engines (whether either is an initial Engine or a Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 11.03 of the Lease. Subject to Section 2.04 of the Participation Agreement, prior to delivery of the initial Lease Supplement, references in the Operative Agreements (including Section 3.03 of the Participation Agreement) to Aircraft shall mean the Airbus A300F4-605R airframe bearing FAA Registration Number N682FE and Manufacturer's serial number 800, together with two General Electric CF6-80C2-A5F engines. Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or engines from time to time installed thereon) to be leased by the Lessor to the Lessee pursuant to the Lease and the initial Lease Supplement and having the United States FAA Registration Number initially and manufacturer's serial number specified in the initial Lease Supplement, including (i) all Parts in respect thereof and (ii) any Replacement Airframe which may be substituted pursuant to Section 11.03 of the Lease and any Pre-Delivery Replacement Airframe which may be substituted pursuant to Section 2.04 of the Participation Agreement. Ancillary Agreement. Any written agreement of the Lessee to which the Lessor is a party or to which the Lessor has consented in writing entered into on or prior to the Delivery Date or any date thereafter in connection with the transactions contemplated by the Operative Agreements, as such agreement may be amended and supplemented from time to time with the consent of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the Owner Participant. Ancillary Agreement I. The Ancillary Agreement I (Federal Express Corporation Trust No. N682FE), dated the Delivery Date, among the Lessee, the Owner Trustee, not in its individual capacity, but solely as Owner Trustee, the Owner Participant and the Indenture Trustee not in its individual capacity, but solely as Indenture Trustee, as originally executed or as amended, modified or supplemented with the consent of all the parties thereto. Application. The application for registration of the Aircraft with the FAA in the name of the Owner Trustee. Appraisal. The report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with a copy of the fair market value letter to the Lessee) on the Delivery Date pursuant to Section 4.02(h) of the Participation Agreement. Average Life Date. For any Certificate, the date which follows the prepayment date by a period equal to the Remaining Weighted Average Life of such Certificate. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France. AVSA Consent and Agreement. The Consent and Agreement dated as of June 15, 1998, executed by AVSA. AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Owner Trustee and to be dated the Delivery Date. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 16.01(e), (f) or (g) of the Lease which either does or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Basic Rent. The periodic rent payable for the Aircraft throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease. Basic Term. The period commencing at the beginning of the day on the Delivery Date and ending at the end of the day on December 1, 2023, or such earlier date on which the Lease shall be terminated as provided therein. Beneficial Interest. The interest of the Owner Participant (or the Initial Owner Participant, as the case may be) under the Trust Agreement. Business Day. Any day on which commercial banks are not authorized or required to close in New York, New York, Memphis, Tennessee and the city in the United States in which the office or agency is maintained by the Pass Through Trustee for the payment of the Pass Through Certificates, and after the Lien of the Indenture is discharged, Boston, Massachusetts. Certificate Closing Date. The date of the closing with respect to the purchase of Certificates by the Pass Through Trustee contemplated by Section 2.01(b) of the Participation Agreement. Certificates. The Equipment Trust Certificates (Federal Express Corporation Trust No. N682FE), issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time in effect. Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Closings. The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the acquisition of Certificates by the Pass Through Trustee. Code. Except as otherwise provided, the Internal Revenue Code of 1986, as amended from time to time. Collateral Account. The deposit account established and maintained pursuant to Section 2.13 of the Indenture. Collateral Agreement. The Collateral Account Control Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, among State Street Bank and Trust Company, the Indenture Trustee and the Owner Trustee. Commitment. The amount of the Owner Participant's participation in the Purchase Price required to be made available or paid as provided in Section 3.02 of the Participation Agreement. Consent and Agreement. The Consent and Agreement dated as of June 15, 1998 executed by the Manufacturer. Consent and Guaranty. The Consent and Guaranty of the Manufacturer attached to the Purchase Agreement. Corporate Trust Administration. The Corporate Trust Administration office of the Owner Trustee located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or such other office at which the Owner Trustee's corporate trust business shall be administered which the Owner Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Indenture Trustee. Corporate Trust Department. The Corporate Trust Department office of the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or such other office at which the Indenture Trustee's corporate trust business shall be administered which the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Participant and the Owner Trustee. CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of the Lease. Cut-Off Date. August 30, 1999. Debt Portion. The amount specified as such on Schedule IV to the Participation Agreement. Debt Rate. The weighted average (based on Outstanding principal amount) rate of interest on the Certificates issued pursuant to the Indenture. Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which the Aircraft is delivered and sold by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease Supplement. Delivery Notice. Notice of the Aircraft's Delivery Date, given by the Lessee as provided in Section 3.01 of the Participation Agreement and including any notice with respect to a postponed Delivery Date given by the Lessee pursuant to Section 3.03(c) of the Participation Agreement. EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the Lease. Eligible Deposit Account. Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution with corporate trust powers organized under the laws of the United States or any state thereof, or the District of Columbia, and whose deposits are insured by the Federal Deposit Insurance Corporation, provided that such institution also has a combined capital and surplus of at least $100,000,000 and a rating of A or better from the Thomson Bank Watch. Eligible Institution. A depository institution organized under the laws of the United States or any one of the states thereof, or the District of Columbia, or any domestic branch of a foreign bank, which in any such case at all times (a) has either (x) a long-term unsecured debt rating of at least Aa2 by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of the Federal Deposit Insurance Corporation. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Lease Supplement and leased pursuant to the Lease, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time be substituted for an Engine pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of the Lease, together with all Parts related thereto. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the Lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Lease. The term "Engines" means, as of any date of determination, both Engines then leased to the Lessee pursuant to the Lease. Engine Consent. The Engine Consent dated as of June 15, 1998, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Engine Warranty Assignment. The Engine Warranty Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Lessee. ERISA. The Employee Retirement Income Security Act of 1974, as amended. ERISA Plan. An employee benefit plan subject to Title I of ERISA, or an individual retirement account or plan subject to Section 4975 of the Code. Estimated Expense Amount. Has the meaning specified in Section 10.01(a) of the Participation Agreement. Event of Default. Each of the events specified in Article 16 of the Lease. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 30 days due to theft or disappearance or such longer period not to exceed 60 days from the end of such initial 30-day period if and so long as the location of such property is known to the Lessee and the Lessee is diligently pursuing recovery of such property, or to the end of the Term, if less (unless such loss constitutes an Event of Loss under clause (ii) of this definition) or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition of title to such property by the Government, any foreign government or purported government or any agency or instrumentality thereof, or (2) condemnation, confiscation, or seizure of, or requisition or taking of, use of such property (A) by a foreign government or instrumentality or agency of any such foreign government, for a period in excess of 180 days (or such shorter period ending on the earlier of the expiration of the Term or on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Term, provided that no Event of Loss shall be deemed to have occurred, and the Term shall be extended automatically for a period of six months (or the date of return of the Aircraft, if shorter, so long as the Lessor receives at least six months notice of such date of return) beyond the end of the Term in the event that the Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant to an activation as part of the CRAF Program described in Section 7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all Airbus A300-600 series aircraft equipped with engines of the same make and model as the Engines for a period of six (6) consecutive months, unless the Lessee, prior to the expiration of such six (6) month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use of the Aircraft or the Airframe shall have been prohibited for a period of twelve (12) consecutive months, unless the Lessee, prior to the expiration of such twelve (12) month period shall have conformed at least one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Lessee. The date of such Event of Loss shall be (s) the 31st day or the 91st day, as the case may be, following loss of such property or its use due to theft or disappearance (or the end of the Term, if earlier); (t) the 61st day following the date of any destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use; (u) the date of any insurance settlement on the basis of a total loss or constructive or compromised total loss; (v) the date of any condemnation, confiscation, seizure or requisition of title of such property; (w) the 181st day following condemnation, confiscation, seizure or requisition for use of such property by a foreign government referred to in clause (iii)(2)(A) above (or the end of the Term or the date of any insurance settlement described therein, if earlier than such 181st day); (x) the last day of the Term in the case of requisition for use of such property by the Government; (y) the last day of the 6 month or 12 month period, referred to in clause (iv) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. Excepted Payments. Collectively, (i) indemnity or other payments (and interest thereon to the extent provided in the Operative Agreements) paid or payable by the Lessee in respect of the Owner Participant, the Owner Trustee in its individual capacity or any of their respective successors, permitted assigns, directors, officers, employees, servants and agents or Affiliates, pursuant to the Participation Agreement or any indemnity hereafter granted to the Owner Participant or the Owner Trustee in its individual capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid for the benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee in their respective individual capacities or by the Owner Participant, or their respective successors, permitted assigns or Affiliates, (iii) proceeds of insurance maintained with respect to the Aircraft by the Owner Participant (whether directly or through the Owner Trustee) maintained in accordance with the provisions of but not required under Article 13 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to the Owner Participant or the Owner Trustee in its individual capacity, after the release thereof from the Lien of the Indenture, (vi) the payment of incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant or their respective authorized representatives payable by the Lessee under Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease following any reregistration of the Aircraft and (vii) proceeds of, and any right to demand, collect or otherwise receive and enforce the payment of any amount described in clauses (i) through (vii) above. Expense; Expenses. Have the meaning specified in Section 9.01(a) of the Participation Agreement. FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Fair Market Renewal Term. A term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the second paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. Fair Market Rental. An amount determined on the basis of, and equal in amount to, the rental which would be obtained in an arm's-length transaction between an informed and willing lessee and an informed and willing lessor unaffiliated with such lessee, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease. Fair Market Rental shall be determined in accordance with the provisions of Section 4.03 of the Lease. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell, assuming that the Aircraft (or other property) is unencumbered by the Lease. Unless otherwise provided in the applicable provisions of any Operative Agreement, in such determination it shall be assumed that the Aircraft is in the condition required under the Lease in the case of return of the Aircraft pursuant to Article 12 of the Lease; provided that in connection with any determination pursuant to or for the purposes of Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where is" basis. Fair Market Value shall be determined in accordance with the provisions of Section 4.03 of the Lease. Federal Aviation Administration. The United States Federal Aviation Administration and any successor agency or agencies thereto. FedEx. Federal Express Corporation. Final Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Fixed Renewal Rent. Semi-annual payments of rent during the Fixed Renewal Term equal to the amount set forth in Ancillary Agreement I. Fixed Renewal Term. The term with respect to which the Lessee has exercised its option to renew the Lease pursuant to the first paragraph of Section 4.01(a) thereof and with respect to which the conditions set forth in such Section 4.01(a) are met. French Pledge Agreement. The French Pledge Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, between the Owner Trustee and the Indenture Trustee. FSB. First Security Bank, National Association, a national banking association. Government. The United States of America or an agency or instrumentality thereof the obligations of which bear the full faith and credit of the United States of America. GTA. The General Terms Agreement dated as of July 3, 1991 between the Engine Manufacturer and the Lessee related to the purchase by the Lessee of the Engines as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only insofar as the General Terms Agreement relates to the Engines, to the extent assigned to the Owner Trustee pursuant to the Engine Warranty Assignment. Holder of a Certificate; Certificate Holder; Holder. As of any particular time, the Person in whose name a Certificate shall be registered (but not including the holder of any Pass Through Certificate). Indemnitee. Each of SSB, in its individual capacity and as Owner Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its individual capacity and as trustee, the Subordination Agent, in its individual capacity and in its capacity as Subordination Agent, each Liquidity Provider, the Owner Participant Guarantor, if any, and any successor (including any trustee which may succeed to the Lessor's interest under the Lease), Affiliate, assign, officer, director, employee, agent and servant of any of the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the Pass Through Trustee nor any holder of a Pass Through Certificate shall be deemed to be an Indemnitee. Indenture. The Trust Indenture and Security Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessor and the Indenture Trustee, as supplemented by the Indenture and Security Agreement Supplement. Indenture and Security Agreement Supplement. The Indenture and Security Agreement Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Indenture. Indenture Default. Any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Indenture Event of Default. Indenture Documents. Has the meaning specified in the Granting Clause of the Indenture. Indenture Event of Default. Each of the events specified in Section 7.01 of the Indenture. Indenture Trustee. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture. Indenture Trustee's Liens. Any Lien against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof resulting from (i) claims against the Indenture Trustee not related to the administration of the Trust Indenture Estate or any transactions pursuant to the Indenture or any document included in the Trust Indenture Estate, (ii) any act or omission of the Indenture Trustee which is not related to the transactions contemplated by the Operative Agreements or is in violation of any of the terms of the Operative Agreements or (iii) Taxes imposed against the Indenture Trustee in its individual capacity against which the Lessee has not indemnified (and is not obligated to indemnify) the Indenture Trustee in such capacity. Independent Investment Banker. An independent investment banking institution of national standing appointed by the Lessee that is independent in fact, does not have any direct financial interests, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture Trustee shall not have received written notice of such an appointment at least 10 days prior to the Prepayment Date, "Independent Investment Banker" shall mean such an institution appointed by the Indenture Trustee. Initial Owner Participant. Federal Express Corporation, a Delaware corporation. Intercreditor Agreement. The Intercreditor Agreement dated as of June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider, the Class B Liquidity Provider and the Subordination Agent. Interest Drawing. Has the meaning specified in Section 1.01 of the Intercreditor Agreement. Invoice. The invoice for the Aircraft given by AVSA to the Lessor. LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany. Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the "Cut-Off Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Last Delivery Date. The later of (i) the Delivery Date and (ii) the "Delivery Date" (as defined in the relevant Related Indenture) for the last Related Aircraft to be delivered. Lease. The Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998, entered into by the Lessor and the Lessee concurrently with the execution and delivery of the Indenture, including, without limitation, supplementation by one or more Lease Supplements entered into pursuant to the applicable provisions of the Lease. Lease Supplement. The Lease Supplement No. 1 (Federal Express Corporation Trust No. N682FE) to be dated the Delivery Date, substantially in the form of Exhibit A to the Lease. Lease Term. The period commencing on the Delivery Date and ending at the end of the Basic Term. Lessee. Federal Express Corporation, a Delaware corporation. Lessee Documents. Has the meaning set forth in Section 6.01(b) of the Participation Agreement. Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the Participation Agreement. Lessor. State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement. Lessor's Estate. All estate, right, title and interest of the Owner Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft, the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment, the Engine Consent, any warranty with respect to the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent, including without limitation, insurance proceeds (other than insurance proceeds payable to or for the benefit of the Owner Trustee in its individual capacity, the Owner Participant or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee, to the Owner Trustee in its individual capacity, or to any of their respective directors, officers, employees and agents pursuant to Articles 8 and 9 of the Participation Agreement), and all other property of the Owner Trustee purportedly subjected to the Lien of the Indenture by the Granting Clause thereof; provided that in no event shall "Lessor's Estate" include any Excepted Payment. Lessor's Liens. Liens against, on or with respect to the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part thereof, title thereto or any interest therein arising as a result of (i) claims against the Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant, in each case not related to the transactions contemplated by the Operative Agreements, (ii) acts or omissions of the Lessor in its individual capacity or as Owner Trustee, and, in the case of the Lessor in its individual capacity, arising from its gross negligence or willful misconduct or expressly prohibited under the Operative Agreements and any act or omission of the Owner Participant which is in violation of any of the terms of the Operative Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its individual capacity or as Owner Trustee, the Owner Participant, Lessor's Estate or the trust created by the Trust Agreement which are not required to be indemnified against by the Lessee pursuant to the Participation Agreement by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the Lessor or the Owner Participant arising from the voluntary transfer by the Lessor or the Owner Participant of its interests in the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a) or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant to the exercise of the remedies set forth in Article 17 of the Lease. Letter of Credit. The Irrevocable Standby Letter of Credit, dated the Certificate Closing Date, in the form of Exhibit G to the Participation Agreement and with a Maximum Stated Amount equal to the amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement, from the LC Bank to and for the benefit of the Subordination Agent. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest or other similar interest. Liquid Collateral. All amounts and securities deposited from time to time in the Collateral Account and all the products, investments, earnings and proceeds of the foregoing, including, but not limited to, all proceeds of the investment or conversion thereof, voluntary or involuntary, into cash, Specified Investments or other property, all rights to payment of any and every kind, and other forms of obligations, and instruments and other property which at any time constitute all or part or are included in the proceeds of any of the foregoing. Liquidity Facility. Has the meaning specified in Section 1.1 of the Intercreditor Agreement. Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation organized under the public law of the Federal Republic of Germany together with any Replacement Liquidity Provider (as defined in the Intercreditor Agreement). Losses. Has the meaning specified in Section 17.02(a) of the Participation Agreement. Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the Lease. Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% of the aggregate unpaid principal amount of all Certificates outstanding as of such date excluding for purposes of this definition any Certificates held by (i) the Owner Trustee or the Owner Participant or any interests of the Owner Participant unless all Certificates then outstanding shall be held by the Owner Participant, (ii) the Lessee or (iii) any Affiliate of any thereof. Make-Whole Premium. With respect to any Certificate, the amount (as determined by an Independent Investment Banker reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (i) the present value of the remaining scheduled payments of principal and interest to the Maturity of such Certificate computed by discounting such payments on a semiannual basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (ii) the outstanding principal amount of such Certificate plus accrued interest. Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement. Mandatory Economic Terms. The terms set forth on Schedule VI to the Participation Agreement. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France. Maturity. With respect to any Certificate, the date on which the final principal amount of such Certificate is scheduled to be due and payable. Maximum Stated Amount. The amount specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the Participation Agreement. Moody's. Moody's Investors Service, Inc. Net Present Value of Rents. The net present value, as of the Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted at a rate equal to the Debt Rate per annum compounded semi-annually. Non-U.S. Person. Any Person other than a U.S. Person. Obsolete Parts. Parts which the Lessee in good faith determines to be obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Officer's Certificate. When delivered pursuant to the Indenture, a certificate signed by a Responsible Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07 of the Indenture. Operative Agreements. The Participation Agreement, the Trust Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA, the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement entered into by or with the written consent of the Indenture Trustee, which by its terms is an Operative Agreement, the Certificates outstanding at the time of reference, the Indenture, the Indenture and Security Agreement Supplement, the Consent and Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity Agreement, each Liquidity Facility, the Intercreditor Agreement, the Collateral Agreement, the Letter of Credit and the Reimbursement Agreement. Opinion of Counsel. When delivered pursuant to the Indenture, a written opinion of legal counsel, who in the case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the Indenture Trustee, an attorney selected by such Person and, in the case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee. Other Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Outstanding. When used with respect to Certificates, as of the date of determination and subject to the provisions of Section 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of the Indenture or otherwise; (ii) Certificates for which prepayment money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 of the Indenture; provided, that if such Certificates are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to Article II of the Indenture. Outstanding C Account. The collateral account established and maintained under a Related Indenture relating to an undelivered aircraft. Owner Participant. The Person to whom on the Delivery Date (or, if earlier, the Transfer Date) the Initial Owner Participant shall transfer its Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and any successors thereto, and any Person to which the Owner Participant transfers, in accordance with the Trust Agreement, its right, title and interest in and to the Operative Agreements and the Lessor's Estate. Owner Participant Guarantor. The provider, if any, of an Owner Participant Guaranty. Owner Participant Guaranty. Any guaranty delivered by the Owner Participant Guarantor. Owner Trust. Federal Express Corporation Trust No. N682FE. Owner Trustee. SSB, not in its individual capacity except as otherwise expressly stated, but solely as Owner Trustee under the Trust Agreement. Owner Trustee Guarantor. The provider, if any, of an Owner Trustee Guaranty. Owner Trustee Guaranty. Any guaranty delivered in compliance with Section 11.01(b)(ii) of the Participation Agreement. Owner's Economic Return. The Owner Participant's anticipated net after-tax book yield and aggregate after-tax cash during the Basic Term utilizing the multiple investment sinking fund method of analysis, computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Price, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3.04 of the Lease. Participation Agreement. The Participation Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, among the Lessee, the Owner Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as owner trustee, the Owner Participant, the Indenture Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as indenture trustee, the Pass Through Trustee not in its individual capacity except as otherwise expressly provided therein, but solely as pass through trustee, and the Subordination Agent not in its individual capacity except as otherwise expressly provided therein, but solely as subordination agent. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or title to which remains vested in the Lessor pursuant to Article 8 of the Lease. Pass Through Agreement. The Pass Through Trust Agreement dated as of May 1, 1997, between the Lessee and the Pass Through Trustee. Pass Through Certificates. Any of the Pass Through Certificates, 1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through Certificates, 1998-1-C, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. Pass Through Closing Date. The Business Day on which the sale of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. Pass Through Trust. The Federal Express Corporation 1998-1 Pass Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass Through Trusts. Pass Through Trustee. First Security Bank, National Association, a national banking association, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust. Past Due Rate. In respect of (A) any amount payable to the Owner Participant or the Owner Trustee a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Debt Rate and (B) any principal of or interest on any Certificate or any other amount payable under the Indenture, any Certificate or any other Operative Agreement that is not paid when due (whether at Maturity, by acceleration, by optional or mandatory prepayment or otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to (i) in the case of any such amount payable to the Holder of any Certificate, 2% plus the interest rate applicable to such Certificate and (ii) in the case of any other such amount, 2% plus the Debt Rate. Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Payment Default. Any event specified in Section 16.01(a) or 16.01(b) of the Lease which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Those investments enumerated in Section 23.01(a) (i), (ii), (iii) and (iv) of the Lease. Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). Pre-Delivery Replacement Airframe. Has the meaning set forth in Section 2.04 of the Participation Agreement. Preliminary Notice. Has the meaning specified in Section 4.01(a) of the Lease. Premium Termination Date. With respect to the Series A Certificates, the scheduled maturity date of the Series A Certificates, with respect to the Series B Certificates, the scheduled maturity date of the Series B Certificates and with respect to the Series C Certificates, the scheduled maturity date of the Series C Certificates. Prepayment Date. Has the meaning specified in Section 6.02(b) of the Indenture. Prepayment Price. Has the meaning specified in Section 6.02(b) of the Indenture. Principal Amount. With respect to a Certificate means the stated original principal amount of such Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all Certificates. Property. Any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. Proposed Termination Date. Has the meaning specified in Section 10.01(a) of the Lease. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement, dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits, appendices and letter agreements attached thereto as originally executed or as modified, amended or supplemented in accordance with the terms thereof, but only to the extent that the foregoing relates to the Aircraft and to the extent assigned pursuant to the Purchase Agreement Assignment. Purchase Agreement Assignment. The Purchase Agreement Assignment (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998 between the Lessor and the Lessee. Purchase Price. Has the meaning specified in Ancillary Agreement I. Rating Agencies. Collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Pass Through Certificates and which shall then be rating the Pass Through Certificates. The initial Rating Agencies will be Moody's and S&P. Rating Agency Confirmation. With respect to any Operative Agreement that is to be modified in any material respect on the Delivery Date or the Transfer Date, if applicable, a written confirmation from each of the Rating Agencies that the use of such Operative Agreement with such modifications would not result in (i) a reduction of the rating for any Class of Pass Through Certificates below the then current rating for such Class of Pass Through Certificates or (ii) a withdrawal or suspension of the rating of any Class of Pass Through Certificates. Record Date. With respect to Payment Dates under the Indenture (except a date for payment of defaulted interest), December 31 for January 15 Payment Dates and June 30 for July 15 Payment Dates, whether or not such date is a Business Day. Recourse Amount. Has the meaning specified in Section 17.10 of the Participation Agreement. Refinancing. A non-recourse loan to the Lessor arranged pursuant to Section 15.01 of the Participation Agreement. Register. Has the meaning set forth in Section 3.02 of the Indenture. Registrar. Has the meaning set forth in Section 3.02 of the Indenture. Regulation D. 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. Reimbursement Agreement. The Standby Letter of Credit Application and Agreement, dated the Pass Through Closing Date, between the Lessee and the LC Bank. Related Aircraft. Each of the aircraft relating to a Related Indenture. Related Indentures. Collectively, the Trust Indenture and Security Agreement for each of Federal Express Corporation Trust Nos. N585FE, N676FE, N677FE, N678FE, N679FE, N680FE, N681FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee, and the Trust Indenture and Security Agreement for Federal Express Corporation Trust No. N675FE, dated as of June 1, 1998, as amended and restated as of June 15, 1998, between State Street Bank and Trust Company of Connecticut, National Association, as owner trustee and First Security Bank, National Association, as indenture trustee. Related Participation Agreements. Collectively, with respect to each Related Indenture, the "Participation Agreement" as defined therein. Remaining Weighted Average Life. On a given date with respect to any Certificate the number of days equal to the quotient obtained by dividing (i) the sum of each of the products obtained by multiplying (a) the amount of each then remaining scheduled payment of principal of such Certificate by (b) the number of days from and including such prepayment date to but excluding the dates on which each such payment of principal is scheduled to be made; by (ii) the then outstanding principal amount of such Certificate. Renewal Rent. The amount payable by the Lessee as rent in accordance with Section 4.01 of the Lease during any Renewal Term. Renewal Term. One or more terms with respect to which the Lessee has exercised its option to renew the Lease pursuant to Section 4.01(a) thereof. Rent. All payments due from the Lessee under the Lease as Basic Rent, Renewal Rent and Supplemental Rent, collectively. Rent Payment Date. Each January 15 and July 15 commencing on January 15, 1999. Reoptimization Date. Has the meaning specified in Section 2.03(b) of the Participation Agreement. Replacement Aircraft. Any aircraft substituted for the Aircraft pursuant to Section 11.03(a) of the Lease. Replacement Airframe. Has the meaning set forth in Section 11.03 of the Lease. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of the same or of equal or greater value, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine; provided, however, that if such replacement engine is not a General Electric CF6-80C2-A5F engine, such replacement engine must then be commonly used in the commercial aviation industry on Airbus A300-600 airframes. Responsible Officer. With respect to the Owner Trustee (except for purposes of the Trust Agreement in which case the definition of Responsible Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the Indenture Trustee, any officer in its Corporate Trust Administration, as the case may be, designated by such Person to perform obligations under the Operative Agreements, and with respect to any other party, any corporate officer or (except in the case of the Owner Participant) other employee of a party who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Ratings Group. Scheduled Delivery Date. The Delivery Date specified in the Delivery Notice pursuant to Section 3.01 of the Participation Agreement. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Secured Obligations. Has the meaning specified in the Granting Clause of the Indenture. Securities Act. The Securities Act of 1933, as amended. Series "A" or "Series A Certificates". Certificates issued and designated as "Series A" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series A". Series "B" or "Series B Certificates". Certificates issued and designated as "Series B" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series B". Series "C" or "Series C Certificates". Certificates issued and designated as "Series C" under the Indenture, in the Principal Amount and maturities and bearing interest as specified in Exhibit B to the Indenture under the heading "Series C". Series C Prepayment Date. July 15, 1999 or any other date designated by the Lessee, but in no event later than the fifteenth day after the Last Cut-Off Date. Series Supplement or Series Supplements. The Series Supplement 1998-1-A to be executed and delivered by the Lessee and the Pass Through Trustee, the Series Supplement 1998-1-B to be executed and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1998-1-C to be executed and delivered by the Lessee and the Pass Through Trustee. Sinking Fund Redemption Date. Has the meaning specified in Section 6.06 of the Indenture. Sinking Fund Redemption Price. Has the meaning specified in Section 6.06 of the Indenture. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Specified Investments. Shall mean (a) direct obligations of the United States of America or obligations fully guaranteed by the United States of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such ratings are unavailable, rated by any nationally recognized rating organization in the United States equal to the highest rating assigned by such rating organization; (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; (d) overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers; or (e) overnight repurchase agreements with respect to the securities described in clause (a) above entered into with an office of a bank or trust company which is located in the United States of America or any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500 million. SSB. State Street Bank and Trust Company of Connecticut, National Association, a national banking association or any successor Owner Trustee in its individual capacity. Stipulated Loss Value. As of any Stipulated Loss Value Determination Date during the Basic Term, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule III of the Lease under the heading "Stipulated Loss Value Factor" opposite such date (as such Schedule III may be adjusted from time to time as provided in Section 3.04 of the Lease), and during any Renewal Term, the amount determined pursuant to Section 4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or the Participation Agreement or the Indenture, each Stipulated Loss Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of Stipulated Loss Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule III of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Stipulated Loss Value is to be calculated with reference to any such date. Stipulated Loss Value Determination Date. Each date set forth on Schedule III of the Lease. Subordination Agent. First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Subordination Agent. Supplemental Rent. (a) All amounts, liabilities and obligations which the Lessee assumes or agrees to perform or pay under the Lease or under the Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement or any other Operative Agreement to SSB, the Lessor, the Owner Participant, the Indenture Trustee, the Subordination Agent, any Liquidity Provider or others, including, without limitation, payments of Stipulated Loss Value, EBO Price and amounts calculated by reference to Termination Value and all amounts required to be paid by Lessee under the agreements, covenants and indemnities contained in the Lease or in the Participation Agreement or the Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic Rent and (b) all amounts that the Owner Trustee is obligated to pay in accordance with clause (b) of the last paragraph of Section 2.04 of the Indenture. Tax. Shall have the meaning set forth in Section 8.01(a) of the Participation Agreement. Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Lessee and the Owner Participant. Term. The Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or such earlier date on which the Lease is terminated pursuant to its terms. Termination Date. A Rent Payment Date during the Basic Term that is on or after December 31, 2005 in the case of Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling on July 15, 2016 or January 15, 2020, as the case may be, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the Lease, January 15, 2018. Termination Value. As of any Termination Date, the amount determined by multiplying the Purchase Price by the percentage set forth in Schedule IV of the Lease under the heading "Termination Value Factor" opposite such Termination Date (as such Schedule IV may be adjusted from time to time as provided in Section 3.04 of the Lease). Notwithstanding any other provisions of the Lease, the Participation Agreement or the Indenture, each Termination Value shall be, under any circumstances and in any event, an amount, together with so much of the arrears portion of Basic Rent due and owing through the date of payment of any amount calculated by reference to Termination Value as does not constitute an Excepted Payment, at least sufficient to pay in full as of such date of payment the aggregate unpaid principal amount of and accrued interest on the Certificates outstanding on such date of payment. Subject to the immediately preceding sentence, it is understood and agreed that the amounts set forth on Schedule IV of the Lease, for dates other than Rent Payment Dates on which arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no further accrual or credit shall be required whenever Termination Value is to be calculated with reference to any such date. Transaction Costs. Those costs and expenses set forth in Section 10.01(a) of the Participation Agreement. Transfer Date. Has the meaning set forth in Section 2.02(b) of the Participation Agreement. Transportation Code. Title 49 of the United States Code, as amended and in effect on the date of the Lease or as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Treasury Yield. At the time of determination with respect to any Certificate, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date on such Certificate and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in public securities markets, (i) one maturing as close as possible to, but earlier than, the Average Life Date of such Certificate and (ii) the other maturing as close as possible to, but later than, the Average Life Date of such Certificate, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Certificate is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15(919). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium will be the third Business Day prior to the applicable prepayment date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable prepayment date. Trust Agreement. The Trust Agreement (Federal Express Corporation Trust No. N682FE), dated as of June 15, 1998, between the Owner Participant and the Owner Trustee in its individual capacity. Trust Estate. The Lessor's Estate. Trust Indenture Act. The Trust Indenture Act of 1939, as amended. Trust Indenture Estate. All estate, right, title and interest of the Indenture Trustee in and to any of the property, rights, interests and privileges granted to the Indenture Trustee pursuant to the Granting Clause of the Indenture, other than Excepted Payments and any and all other rights of the Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee or the Owner Participant pursuant to the Indenture, and the Letter of Credit and any rights thereunder. UCC. Uniform Commercial Code. Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc. Underwriting Agreement. The Underwriting Agreement dated June 30, 1998, among the Lessee and the Underwriters. United States, U.S. or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Transportation Code, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Transportation Code and Part 121 of the regulations under such Transportation Code, for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. U.S. Person. A Person described in Section 7701(a)(30) of the Code. SCHEDULE II BASIC RENT (As a Percentage of Purchase Price) Rent Payment Date Advance Arrears ------- ------- ------- [On each Payment Date, Lessee will pay as Basic Rent an amount that will be at least sufficient to pay in full, as of such Payment Date, the aggregate unpaid principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon.] SCHEDULE III STIPULATED LOSS VALUES Stipulated Loss Date Value Factor ---- --------------- [Stipulated Loss Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE IV TERMINATION VALUES Termination Termination Date Value Factor ----------- ------------ [Termination Value will be an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon.] SCHEDULE V PURCHASE OPTION SCHEDULE (D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease. In the event of any Significant Expenditure (as defined below) with respect to the Aircraft, which the Lessee has certified in a certificate of the Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant Treasurer furnished to the Lessor, the Indenture Trustee and the Owner Participant, is (as determined by the Lessee in its sole discretion) necessary, desirable or required to be made at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date occurring at least six months after the Owner Participant have notified the Lessee that they will not permit such Significant Expenditure to be financed as contemplated in clause (ii) of the definition of "Significant Expenditure" below, for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and the Termination Value for the Aircraft, determined in each case as of such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the Lessor's obligations under the Indenture, the Certificates and Section 7.04 of the Participation Agreement, and the payment to the Lessor in immediately available funds of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid principal amount of the Certificates outstanding plus accrued interest as of such date; it being understood that the Fair Market Value for this purpose shall be determined without regard to any Significant Expenditure not yet made. For purposes of this paragraph (D) the term "Significant Expenditure" means a single expenditure or a series of related expenditures in respect of non-severable improvements (i.e. improvements which cannot by the terms of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the Owner Participant will not permit to be financed on similar terms and conditions then available for similar transactions through the issuance of additional non-recourse notes of the Lessor or through additional equity investments of the Owner Participant or both (it being understood that Section 4.02(a)(D) of the Lease shall not impose any obligation on the Owner Participant to provide such financing). The Lessee, prior to notifying the Owner Participant and the Indenture Trustee in accordance with Paragraph (F) of this Schedule V of its election to purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the Owner Participant of the non-severable improvements which would satisfy the conditions described in clause (i) of the preceding sentence, and provide the Owner Participant with a reasonable opportunity to permit the financing thereof as contemplated in clause (ii) of such sentence. The Owner Participant shall notify the Lessee of their decision with respect to such financing within 60 days after the Lessee has given the notice described in the preceding sentence. (E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease. In the event that a Burdensome Indemnity Payment (as defined below) shall occur at any time on or after the eighth anniversary of the Delivery Date, the Lessee may elect to terminate the Lease and purchase the Aircraft on the first Rent Payment Date (the "Burdensome Indemnity Payment Date") following the date that the Owner Participant provide the Lessee with a written notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's option, either (1) the payment to the Lessor in immediately available funds of an amount equal to the greater of the Fair Market Value of the Aircraft and Termination Value for the Aircraft, determined in each case as of such Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee, pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture, of all of the obligations of the Lessor under the Indenture, the Certificates and Section 7.04 of the Participation Agreement and the payment to the Lessor in immediately available funds, of an amount equal to the excess of (A) the greater of (I) the Termination Value for the Aircraft and (II) the Fair Market Value of the Aircraft, both computed as of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of the Certificates outstanding plus accrued interest as of such date. For purposes of this paragraph (E), the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax Indemnity Agreement resulting from any act, event or circumstance which is outside the control of the Lessee or any Affiliate of the Lessee which causes the aggregate net present value as of the determination date, discounted semi-annually at the Debt Rate, of all such Losses (but excluding any Losses for which the Owner Participant shall have waived its right to payment under the Tax Indemnity Agreement) paid or payable by the Lessee which can be avoided through a purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase Price. (F) Notice from the Lessee. The Lessee shall give the Lessor, the Owner Participant and the Indenture Trustee not more than 360 days nor less than 90 days prior written notice of its election to purchase pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either direct the Lessor to prepay the Certificates in full on such Termination Date pursuant to Section 6.02 of the Indenture or state that the Lessee shall exercise its option to assume the Certificates pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of the Indenture. The Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease shall become irrevocable 10 days prior to the applicable purchase date designated in such notice but if any such notice is revoked, the Lessee shall no longer be entitled to purchase the Aircraft as a result of the facts and circumstances originally giving rise to such right. Exhibit A to Lease Agreement THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT NO. __ IS SUBJECT TO A SECURITY INTEREST LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N682FE) LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No. N682FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Lessor and the Lessee have entered into that certain Lease Agreement (Federal Express Corporation Trust No. N682FE) dated as of June 15, 1998 (the "Lease", the defined terms in the Lease being used in this Lease Supplement with the same meaning as in the Lease), which provides for the execution and delivery of a Lease Supplement, substantially in the form of this Lease Supplement No. __, for the purpose of leasing under the Lease the aircraft and engines described below ("Aircraft") as and when delivered by the Lessor to the Lessee in accordance with the terms of the Lease; WHEREAS, the Lease relates to the Aircraft; WHEREAS, a counterpart of the Lease is attached to and made a part of this Lease Supplement, and this Lease Supplement, together with such attachment, is being filed for recordation on this date with the FAA as one document. NOW, THEREFORE, for and in consideration of the premises and other good and sufficient consideration, the Lessor and the Lessee agree as follows: Section 1. Delivered Aircraft. The Lessor hereby delivers and leases to the Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor under the Lease, the following described Airbus A300F4-605R Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of this Lease Supplement consists of the following: (a) Airbus A300F4-605R Airframe; U.S. Registration Number ______; Manufacturer's Serial No. ___; and (b) Two (2) General Electric CF6-80C2-A5F Engines bearing, respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower). Section 2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease Supplement. Section 3. Purchase Price. The Purchase Price of the Delivered Aircraft shall be the amount set forth in Ancillary Agreement I. Section 4. Term. The Term for the Delivered Aircraft shall commence on the Delivery Date, and shall terminate on ______, ____, unless earlier terminated or extended pursuant to the terms of the Lease. Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent for the Delivered Aircraft throughout the Term thereof in accordance with the terms and provisions of the Lease. Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby confirms to the Lessor that the Delivered Aircraft has been duly marked in accordance with Section 7.03 of the Lease and that the Lessee has accepted the Delivered Aircraft for all purposes hereof and of the Lease, and as being free and clear of all Liens except Lessor's Liens. Such acceptance by the Lessee shall be without prejudice to any rights of the Lessor or the Lessee against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of equipment included in the Aircraft. Section 7. Incorporation of Lease By Reference. All the provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth in this Lease Supplement. Section 8. Governing Law. THIS LEASE SUPPLEMENT 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 BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING DELIVERED IN THE STATE OF NEW YORK. Section 9. Agreement as Chattel Paper. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the UCC as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original chattel-paper counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. Section 10. Counterparts. This Lease Supplement may be executed in any number of counterparts, each of which shall be an original (except that only the counterpart bearing the receipt executed by Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the UCC), but all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Lease Supplement by signing any such counterpart. IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written. LESSOR: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: __________________________________________ Name: Paul D. Allen Title: Vice President LESSEE: FEDERAL EXPRESS CORPORATION By: ___________________________________________ Name: Robert D. Henning Title: Vice President and Treasurer Receipt of this original counterpart of the Lease Supplement is hereby acknowledged on this ___ day of ______ 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _____________________________________________ Name: Greg A. Hawley Title: Vice President EX-4.F 11 EXHIBIT 4.f ANCILLARY AGREEMENT I (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) This Ancillary Agreement I ("Agreement") dated June 18, 1998, as amended and restated on July 7, 1998, among Federal Express Corporation, a Delaware corporation, PMCC Leasing Corporation, a Delaware corporation, State Street Bank and Trust Company of Connecticut, National Association, a national banking association, not in its individual capacity but solely as Owner Trustee under the Lease, and First Security Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee. Reference is made to that certain leveraged lease dated as of June 1, 1998, as amended and restated as of June 15, 1998 of one (1) Airbus A300F4-605R Aircraft initially bearing FAA Registration No. N675FE (or any replacement thereof under such lease). Capitalized terms used herein shall have the meaning assigned to such terms in the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee ("Lessee"), PMCC Leasing Corporation, as Owner Participant ("Owner Participant"), State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as otherwise stated, but solely as Owner Trustee under the Trust Agreement referred to therein ("Owner Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Indenture Trustee under the Trust Indenture and Security Agreement ("Indenture Trustee"), First Security Bank, National Association, not in its individual capacity, except as otherwise stated, but solely as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent, and Morgan Guaranty Trust Company of New York, as Original Loan Participant. With respect to said transaction the parties agree as follows, anything in the Operative Agreements to the contrary notwithstanding: 1. The references to Event of Default in Section 4.01(a) of the Lease shall include Payment Default and Bankruptcy Default. 2. Clause (iii) of the first sentence of Section 4.02(a) of the Lease shall also include a Payment Default. 3. The words "or substantial civil unrest" shall be inserted after the words "such country shall not then be experiencing war" in Section 7.02(a)(i) of the Lease and "which is not experiencing war" in Section 7.02(a)(ii) of the Lease. 4. Section 10.01(c) of the Lease shall be replaced with and read as follows: (c) Payments to the Lessor. The total selling price realized at a sale pursuant to Section 10.01(b) hereof (the "Gross Sales Price") shall be retained by the Lessor (or the Indenture Trustee as long as the Indenture is in force) and, in addition, on or before the Proposed Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee as long as the Indenture is in force), by wire transfer of immediately available funds, the sum of: (i) the excess, if any, of the Termination Value for the Aircraft computed as of the Proposed Termination Date over the Gross Sales Price; plus (ii) the installment of Basic Rent due with respect to the Aircraft on the Proposed Termination Date to the extent payable in arrears but not to the extent payable in advance; plus (iii) all other amounts then due and payable by the Lessee (including, without limitation, the aggregate amount of any Make-Whole Premium) under this Lease and any other Operative Agreement. All expenses of the sale shall be borne by the Lessee. 5. The first proviso in Section 16.01(d) of the Lease shall be replaced with and read as follows: provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Lessee shall have promptly undertaken such cure after the Lessee receives notice thereof which undertaking shall be diligently and continuously pursued using the Lessee's reasonable best efforts, and so long as, in the case of the Lessee's obligation to remove Liens, during such extended cure period there is no (i) material danger of the sale, forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or any Engine or any interest therein, (ii) material risk of civil liabilities or (iii) risk of the assertion of criminal charges against the Lessor, the Owner Participant or the Indenture Trustee, such failure shall not constitute an Event of Default;. 6. The definition of "Replacement Engine" in Schedule II to the Participation Agreement shall read as follows: Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer) of equal or greater value, airworthiness, remaining useful life and utility as the Engine being replaced, together with all Parts relating to such engine, and suitable for installation and use on the Airframe; provided, that an engine of another manufacturer of equivalent or greater value, utility, remaining useful life and airworthiness, and suitable for installation and use on the Airframe may constitute a Replacement Engine if at the time of replacement General Electric is no longer manufacturing engines certificated for use on the Airframe, the Lessee does not at the time of replacement own or lease any General Electric engines certificated for use on the Airframe or, except in connection with the return of the Aircraft under Article 12 of the Lease, General Electric is no longer manufacturing engines which reasonably fulfill the Lessee's operational requirements; and provided further that such engine shall be of the same make, model and manufacturer as the other engine installed on the Aircraft and shall be an engine of a type then being utilized by the Lessee on a significant number of other Airbus A300-600 airframes operated by the Lessee. 7. The Assignment and Assumption Agreement shall be substantially in the form of Exhibit G-1 to the Participation Agreement, and the Owner Participant Guaranty shall be substantially in the form of Exhibit G-2 to the Participation Agreement. This Agreement is intended to be and shall be deemed an "Operative Agreement". This Agreement is further intended to amend and modify certain provisions of the other Operative Agreements as set forth herein, and in the event of any conflict between the provisions of this Agreement and any other Operative Agreement, the provisions hereof shall govern. To the extent that this Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Agreement may be created through the transfer or possession of any counterpart other than the original counterpart, which shall be the counterpart containing the receipt executed by the Indenture Trustee on its signature page. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. This Agreement may be executed in separate counterparts, each of which when so executed and delivered shall be an original (except that only the counterpart bearing the receipt executed by the Indenture Trustee shall be the original for purposes of perfecting a security interest therein as chattel paper under the Uniform Commercial Code), but all such counterparts shall together constitute but one and the same instrument. This Agreement shall inure to the benefit of the addressees hereof and their respective successors and assigns. The parties hereto agree that acceptance of this Agreement may be made by the Indenture Trustee, on behalf of the Holders from time to time of the Certificates, by execution by the Indenture Trustee of the form of acceptance provided below, with the same effect as if such Holders had executed such form of acceptance. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. FEDERAL EXPRESS CORPORATION By: _________________________________ Name: Robert D. Henning Title: Vice President and Treasurer PMCC LEASING CORPORATION By: _________________________________ Name: Joan D. Woodroof Title: Director, Structured Finance, Philip Morris Capital Corporation STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee By: _________________________________ Name: Paul D. Allen Title: Vice President FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By: _________________________________ Name: Greg A. Hawley Title: Vice President Receipt of this original counterpart of the Ancillary Agreement I is hereby acknowledged on this ___ day of July, 1998. Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION not in its individual capacity, but solely as Indenture Trustee By: _________________________________ Name: Greg A. Hawley Title: Vice President EX-4.G 12 EXHIBIT 4.g Bankmont Financial Corp. - ------------------------------------------------------------------------------- BANKMONT FINANCIAL CORP. AMENDED AND RESTATED GUARANTY Dated July 7, 1998 To Each of the Institutions Listed on Schedule A Attached Hereto (the "Addressees"): Ladies and Gentlemen: Reference is hereby made to the Participation Agreement (Federal Express Corporation Trust No. N590FE) dated as of May 1, 1998, as amended and restated as of June 15, 1998 among BMO Leasing (U.S.), Inc., as Owner Participant, Federal Express Corporation, as Lessee, Morgan Guaranty Trust Company of New York, as Original Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity, except as expressly set forth therein, but solely as Owner Trustee, First Security Bank, National Association, as Indenture Trustee, First Security Bank, National Association, as Subordination Agent and First Security Bank, National Association, as Pass Through Trustee (the "Participation Agreement"). Capitalized terms used herein without definition and which are defined in Schedule II to the Participation Agreement are used herein with the respective meanings given such terms in Schedule II to the Participation Agreement. WHEREAS, the Owner Participant is a direct wholly-owned subsidiary of Bankmont Financial Corp. (together with its successors and assigns, the "Guarantor"), and the Guarantor has determined that the delivery of the Guaranty dated May 27, 1998, as amended and restated on the date hereof (this "Guaranty") and consummation of the transactions contemplated by the Participation Agreement and the other Operative Agreements are in furtherance of its interest; and WHEREAS, it is a condition to the effectiveness of the transactions contemplated by the Participation Agreement that the Guarantor execute and deliver this Guaranty; NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor hereby agrees as follows: 1. Representations and Warranties. The Guarantor is duly incorporated and validly existing in good standing under the laws of the State of Delaware. The execution, delivery and performance of this Guaranty are within the Guarantor's corporate powers, and this Guaranty constitutes a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms except as such enforceability may be limited by insolvency, reorganization, receivership, liquidation (in each case relating to any insolvency, reorganization, receivership or liquidation of the Guarantor) or similar laws and equitable principles affecting the rights of creditors generally. The execution, delivery and performance of this Guaranty does not and will not conflict with or result in any violation of or default under any provisions of the Certificate of Incorporation or By-Laws of the Guarantor or any instrument, law, rule or regulation applicable to the Guarantor, does not and will not result in violation of any judgment or order applicable to the Guarantor or require the creation or imposition of any Lien on any of the properties or revenues of the Guarantor pursuant to any requirement of law or contractual obligation of Guarantor and does not and will not require consent, approval or authorization of, or registration or filing with, any governmental authority. As of the date hereof, there are no pending or, to the knowledge of the Guarantor, threatened actions or proceedings before any court or administrative agency or arbiter that would adversely affect the ability of the Guarantor to perform its obligations hereunder. 2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to each Addressee, as primary obligor and not merely as surety, (A) the due and punctual performance of all obligations of the Owner Participant arising under or pursuant to the Operative Agreements and (B) the due and punctual payment when due of any and all sums which are now or thereafter imposed on or payable by the Owner Participant pursuant to any provisions of the Operative Agreements, including, without limitation, any amount for which the Owner Participant is or may at any time become liable by reason of any breach of or failure to perform or observe, or any other non-compliance with, any covenant, condition or agreement or other obligation to be performed by the Owner Participant under any of the Operative Agreements or any falsity of any representation or warranty of the Owner Participant in any of the Operative Agreements (the performance and payment obligations described in this sentence above being the "Obligations"). Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all obligations and payments which constitute part of the Obligations and would be owed by the Owner Participant under the Operative Agreements but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Owner Participant. 3. Guaranty Absolute. The Guarantor guarantees that the Obligations will be performed and paid strictly in accordance with the terms of the Operative Agreements, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Addressee, the Guarantor or the Owner Participant with respect thereto. The Obligations of the Guarantor under this Guaranty are independent of the Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Owner Participant or whether the Owner Participant is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Operative Agreements or any term thereof or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of performance or payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Operative Agreements; (iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of the Owner Participant or the Guarantor; (v) any change, restructuring or termination of the corporate structure or existence of the Owner Participant or the Guarantor or any insolvency, bankruptcy, reorganization or other similar proceedings affecting the Owner Participant or its assets or any resulting release or discharge of any of the Obligations; (vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Owner Participant or a guarantor thereof (other than the defense by the Guarantor of payment or performance by the Guarantor of all the Obligations); (vii) any extension, indulgence or renewal with respect to any obligation of the Owner Participant under any of the Operative Agreements; (viii) any modification of, or amendment or supplement to, any such agreement; (ix) any furnishing or acceptance of additional security or any release of any security; or (x) any waiver, compromise, consent or other action or inaction, or any exercise or non-exercise of any right, remedy or power with respect to the Owner Participant. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any Addressee upon the insolvency, bankruptcy or reorganization of the Owner Participant or otherwise, all as though such payment had not been made at such time. 4. Waiver. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that any Addressee protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Owner Participant or any other person or entity or any collateral. This is a guaranty of payment and performance, not collection. The obligations of the Guarantor hereunder are absolute, present and continuing obligations which are not conditional upon the institution of suit against or the exercise of any remedies against the Owner Participant, or any attempt to foreclose or realize upon any security for obligations of the Owner Participant or the taking of any other action with respect to the Owner Participant. 5. Subrogation. The Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any performance or payment made hereunder or otherwise, until all the Obligations and all other amounts payable under this Guaranty shall have been paid in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time prior to the later of the payment in full of the Obligations and all other amounts payable under this Guaranty, such amount shall be held in trust for the benefit of the Addressees and shall forthwith be paid to the Addressees to be credited and applied upon the Obligations, whether matured or unmatured, in accordance with the terms of the Operative Agreements or to be held by the Addressees as collateral security for any Obligations thereafter existing. If (i) the Guarantor shall make payment to the Addressees of all or any part of the Obligations and (ii) all the Obligations and all other amounts payable under this Guaranty shall be satisfied or paid in full, the Addressees will, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Obligations resulting from such payment by Guarantor. 6. Amendments, Etc. No amendment or waiver of any provision of this Guaranty, and no consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same be in writing and signed by each Addressee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 7. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier information) and mailed, telecopied or delivered to it, if to the Guarantor, at its address 115 S. LaSalle Street, Chicago, Illinois 60603, with a copy to Counsel; any Addressee, at its address and in the manner specified in the Participation Agreement; or, as to either party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, when mailed or telecopied, be effective when deposited in the mails or telecopied. 8. No Waiver; Remedies. No failure on the part of any Addressee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder 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. 9. Miscellaneous. This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the payment or satisfaction in full of the Obligations and the payment of all other amounts payable under this Guaranty or the date of the transfer of all of the Owner Participant's interest in the Trust Estate and the Operative Agreements to a transferee pursuant to Article 5 of the Trust Agreement upon satisfaction of all the conditions set forth in Article 5 of the Trust Agreement; (ii) are binding upon the Guarantor, its successors and assigns; and (iii) inure to the benefit of, and be enforceable by, any Addressee and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), any Addressee may assign or otherwise transfer all or any portion of its rights and obligations under the Operative Agreements in accordance therewith to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to any Addressee herein or otherwise. 10. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BANKMONT FINANCIAL CORP. By____________________________________ Pierre O. Greffe Treasurer and Chief Financial Officer SCHEDULE A TO GUARANTY Owner Participant - ----------------- BMO Leasing (U.S.), Inc. Lessee - ------ Federal Express Corporation Indenture Trustee, Subordination Agent and Pass Through Trustee - -------------------------------------- First Security Bank, National Association Owner Trustee - ------------- State Street Bank and Trust Company of Connecticut, National Association Owner Participant Guarantor - --------------------------- Bankmont Financial Corp. Agent and Original Loan Participant - ----------------------------------- Morgan Guaranty Trust Company of New York - ------------------------------------------------------------------------------- OWNER PARTICIPANT GUARANTY (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) Dated June 18, 1998 Amended and Restated on July 7, 1998 from PHILIP MORRIS CAPITAL CORPORATION, as Owner Participant Guarantor to FEDERAL EXPRESS CORPORATION, as Lessee STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not in Its Individual Capacity, but Solely as Owner Trustee, as Owner Trustee FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Indenture Trustee and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Pass Through Trustee - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- Section 1. Definitions.......................................... 1 Section 2. Guaranty............................................. 1 Section 3. No Subrogation....................................... 2 Section 4. Amendments with Respect to the Obligations; Waiver of Rights............................................... 2 Section 5. Guaranty Absolute and Unconditional.................. 3 Section 6. Reinstatement........................................ 4 Section 7. Payments............................................. 5 Section 8. Representations and Warranties....................... 5 Section 9. Severability......................................... 6 Section 10. Jurisdiction; Waiver of Jury Trial, Etc.............. 6 Section 11. Section Headings..................................... 6 Section 12. No Waiver; Cumulative Remedies....................... 6 Section 13. Amendments and Waivers............................... 7 Section 14. Successors and Assigns............................... 7 Section 15. GOVERNING LAW........................................ 7 Section 16. Notices.............................................. 7 OWNER PARTICIPANT GUARANTY (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE) OWNER PARTICIPANT GUARANTY (FEDERAL EXPRESS CORPORATION TRUST NO. N675FE), dated June 18, 1998, as amended and restated on July 7, 1998 (this "Guaranty") by PHILIP MORRIS CAPITAL CORPORATION, a Delaware corporation (the "Guarantor"), to State Street Bank and Trust Company of Connecticut, National Association, in its individual capacity and as Owner Trustee, First Security Bank, National Association, as Indenture Trustee and Pass Through Trustee, and Federal Express Corporation, as Lessee (collectively, together with their successors and assigns and the holders from time to time of the Certificates, the "Beneficiaries"). W I T N E S S E T H : WHEREAS, PMCC LEASING CORPORATION, a Delaware corporation (the "Owner Participant"), is party to the Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement"), among Federal Express Corporation, as Lessee, the Owner Participant, as Owner Participant, Morgan Guaranty Trust Company of New York, as Loan Participant, State Street Bank and Trust Company of Connecticut, National Association, not in its individual, except as otherwise stated therein, but solely as Owner Trustee, First Security Bank, National Association, not in its individual, except as otherwise stated therein, but solely as Indenture Trustee, First Security Bank, National Association, not in its individual, except as otherwise stated therein, but solely as Pass Through Trustee and First Security Bank, National Association, as Subordination Agent; and WHEREAS, in order to induce the Beneficiaries to enter into the Participation Agreement and the other Operative Agreements, the Guarantor desires to enter into this Guaranty to guarantee the Owner Participant's performance and compliance with the covenants, agreements, obligations, terms and conditions of or applicable to the Owner Participant under and pursuant to the Operative Agreements. NOW, THEREFORE, in consideration of the premises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby covenants and agrees as follows: Section 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Participation Agreement. Section 2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor and not merely surety, to the Beneficiaries the prompt and complete payment by the Owner Participant when due of all payment obligations of the Owner Participant under the Operative Agreements without offset or deduction and the timely performance of all other obligations of the Owner Participant thereunder (such payment and other obligations, the "Obligations"), and the Guarantor further agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) that may be paid or incurred by the Beneficiaries in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guaranty. The Guarantor will not exercise any rights that it may now or hereafter acquire against Owner Participant that arise from the existence, payment, performance or enforcement of the Guarantor's Obligations under this Guaranty or the Operative Agreements, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Beneficiary against Owner Participant or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from Owner Participant, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations have been performed in full and all other amounts payable under this Guaranty shall have been paid in full in cash. If any amount shall be paid to the Guarantor in violation of the preceding sentence at any time prior to the final payment in full in cash of the Obligations and all other amounts payable under this Guaranty, such amount shall be held in trust for the benefit of any Beneficiary and shall forthwith be paid to such Beneficiary to be credited and applied to the Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Operative Agreements, or to be held as collateral for any Obligations or other amounts payable under this Guaranty thereafter arising. Section 3. No Subrogation. Notwithstanding anything to the contrary in this Guaranty, the Guarantor hereby agrees not to assert any rights which may have arisen in connection with this Guaranty to be subrogated to any of the rights (whether contractual, under the Bankruptcy Code, under common law or otherwise) of any Beneficiary against the Owner Participant for the payment of the Obligations until all of the Obligations shall have been satisfied by payment and performance in full. Section 4. Amendments with Respect to the Obligations; Waiver of Rights. The Guarantor shall remain fully obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the obligations continued, and the Obligations, may, from time to time, in whole or part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Operative Agreement may be amended, modified, supplemented or terminated, in whole or in part, in accordance with the provisions thereof from time to time. When making any demand hereunder against the Guarantor, a Beneficiary may, but shall be under no obligation to, make a similar demand on the Owner Participant, and any failure by a Beneficiary to make any such demand or to collect any payments from the Owner Participant or any release of the Owner Participant shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Beneficiary against the Guarantor. For the purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings. The Guarantor represents and warrants that it is the parent of the Owner Participant, and agrees that its obligations hereunder shall continue unimpaired, even if the Guarantor is no longer an Affiliate of the Owner Participant. Section 5. Guaranty Absolute and Unconditional. The Guarantor guarantees that the Obligations will be paid and performed strictly in accordance with the terms of the Operative Agreements, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any such terms or the rights of any Beneficiary with respect thereto. The obligations of the Guarantor under this Guaranty are independent of the Obligations or any other obligations of any other party, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether the Owner Participant or any other party is joined in any such action or actions. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between the Owner Participant or the Guarantor and any Beneficiary shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. The Guarantor waives, to the fullest extent permitted by applicable law, diligence, presentment, promptness, protest, mitigation of damages by the Beneficiaries demand for payment and notice of default or nonpayment to or upon the Owner Participant or the Guarantor with respect to the Obligations. The Guarantor further waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Obligations, whether existing now or in the future. The Guarantor understands and agrees that, to the fullest extent permitted by applicable law, this Guaranty shall be construed as a continuing, absolute and unconditional guaranty of payment and performance (and not merely of collectibility) without regard to: (a) the validity, regularity or enforceability of any Operative Agreement, or any of the Obligations at any time or from time to time held by any Beneficiary; (b) any defense, set-off, rebate, adjustment, withholding, deduction or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Owner Participant against any Beneficiary or any agreement or instrument relating thereto or; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations or any other obligations of any other party under the Operative Agreements, or any other amendment or waiver of or any consent to departure from the other Operative Agreements; (d) any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; (e) any change, restructuring or termination of the corporate structure or existence of the Guarantor or the Owner Participant or any of the Affiliates of either; (f) any defect in the title, condition, design, operation or fitness of, or any interference with the operation, use or possession of, the Aircraft; (g) any failure to establish, perfect or preserve title to or any security interest in or to the Aircraft or any other collateral security for the Obligations; or (h) any other circumstance whatsoever or any existence of or reliance on any representation by any Beneficiary that might otherwise constitute a defense available to, or a discharge of, the Guarantor or any other guarantor or surety. When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Owner Participant for the Obligations, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Owner Participant, or any release of the Owner Participant, shall not, to the fullest extent permitted by applicable law, relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guaranty is a continuing guaranty and shall remain in full force and effect until the earlier of (x) the date that all of the Obligations are satisfied by payment and performance in full and (y) the date that all right, title and interest of the Owner Participant shall have been transferred to a Person meeting the requirements of Section 7.03(d) of the Participation Agreement in accordance with said section; provided that this Guaranty shall remain in full force and effect with respect to obligations relating to the period prior to such transfer. Section 6. Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Beneficiary upon the insolvency, bankruptcy dissolution, liquidation or reorganization of the Owner Participant or the Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Owner Participant or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made and the Guarantor agrees that it will indemnify any such Beneficiary on demand for all reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) by such Beneficiary in connection with such rescission or restoration. Section 7. Payments. The Guarantor hereby guarantees that payments hereunder shall be paid without set-off, counterclaim, deduction, rebate, adjustment or withholding, and shall be made in U.S. Dollars in immediately available funds. Section 8. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and the Owner Participant is currently a subsidiary of the Guarantor; (b) the Guarantor has the power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guaranty; (c) this Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of this Guaranty will not violate any provision of any requirement of law or contractual obligation of the Guarantor or any of its constitutive documents; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty; (f) the Guarantor is a corporation acting for its own account having a combined capital and surplus (or, if applicable, consolidated tangible net worth or its equivalent) of not less than $75,000,000; (g) there are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived; and (h) the Guarantor has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and the Guarantor has established adequate means of obtaining from Owner Participant on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the financial condition, operations, properties and prospects of Owner Participant. Section 9. Severability. Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 10. Jurisdiction; Waiver of Jury Trial, Etc. (a) The Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York, New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any Operative Agreement to which it is or is to be a party, or for recognition or enforcement of any judgment, and the Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty or any Operative Agreement to which it is or is to be a party in the courts of any jurisdiction. (b) The Guarantor irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any Operative Agreement to which it is or is to be a party in any New York State or federal court. The Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Section 11. Section Headings. The Section headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. Section 12. No Waiver; Cumulative Remedies. No Beneficiary shall by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right power or privilege. A waiver by a Beneficiary of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Beneficiary would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. Section 13. Amendments and Waivers. None of the terms or provisions of this Guaranty may be waived, amended or supplemented or otherwise modified except by a written instrument executed by the Guarantor and each Beneficiary. Section 14. Successors and Assigns. This Guaranty shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Beneficiaries and their respective successors and permitted assigns but Guarantor may not assign this Guaranty without prior written consent of the Beneficiaries except to an assignee making, as of the date of such assignment, (i) representations and warranties substantially similar to those contained in Section 8 hereof and (ii) a representation that it is a U.S. citizen, unless, in the case of the preceding clause (ii) any of (a) the aircraft is not then registered in the United States nor contemplated to be so registered or (b) a voting trust or similar arrangement reasonably satisfactory to the Beneficiaries is in place with respect to such registration or (c) it is not necessary for the Guarantor to be a U.S. citizen in order for the aircraft to remain registered in the United States. Section 15. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Section 16. Notices. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made, when delivered by hand or by mail, upon receipt, or, when delivered by facsimile transmission, upon being sent and confirmed, addressed (a) in the case of the Guarantor, to the Guarantor at its office at 200 First Stamford Place, Stamford, Connecticut 06902, Attention: Vice President Leasing with a copy to Director, Portfolio Administration, telephone (914) 335-5000, facsimile (914) 335-8301, and (b) in the case of any Beneficiary, to such Beneficiary at the address provided for such Beneficiary in or pursuant to the Participation Agreement. IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered by its duly authorized officer as of the day and year first above written. PHILIP MORRIS CAPITAL CORPORATION By:_______________________________________ Name: Joan D. Woodroof Title: Director, Structured Finance EX-4.H 13 EXHIBIT 4.h OWNER TRUSTEE PARENT GUARANTEE OWNER TRUSTEE PARENT GUARANTEE, dated May 27, 1998, as amended and restated on July 7, 1998, by State Street Bank and Trust Company, a Massachusetts trust company (the "Guarantor") to and for the benefit of each person listed on Schedule I hereto (collectively, together with their permitted successors and assigns, the "Beneficiaries" and, individually, a "Beneficiary"). WITNESSETH: WHEREAS, State Street Bank and Trust Company of Connecticut, National Association, a wholly-owned subsidiary of the Guarantor (the "Subsidiary") wishes to act pursuant to the agreements listed on Schedule II hereto (as amended, modified or supplemented from time to time, the "Agreements"); WHEREAS, the Beneficiaries are willing to have the Subsidiary act under the Agreements provided that the Guarantor executes and delivers this Guarantee; WHEREAS, the Guarantor has determined that the execution and delivery by it of this Guarantee is necessary in order to conduct, promote and attain the business of the Subsidiary and the Guarantor; NOW, THEREFORE, the Guarantor hereby agrees with and for the benefit of the Beneficiaries as follows: 1. Guarantee. (a) The Guarantor hereby guarantees to the Beneficiaries the prompt and complete payment by the Subsidiary when due of, and the faithful performance of, and compliance with, all payment obligations of the Subsidiary under the Agreements and any other document relating thereto to which the Subsidiary is or may hereafter become a party or by which the Subsidiary is or may hereafter become bound (collectively, the "Relevant Documents"), in accordance with the terms thereof and the timely performance of all other obligations of the Subsidiary thereunder (such payment and other obligations, the "Obligations"). In no event, however, shall the agreement contained herein be construed to constitute a guarantee of any amount due (i) under any note or other similar instrument issued under the Relevant Documents or any other payment due under any Relevant Document that constitute non-recourse obligations of the Subsidiary, or (ii) with respect to acts or events occurring after such time, if any, that the Subsidiary ceases to be a party to the Relevant Documents. The agreement contained herein shall be enforceable against the Guarantor, notwithstanding the fact that the Subsidiary has ceased to be a party to the Relevant Documents, provided that the events or acts which give rise to such claim against the Guarantor occurred at such time as the Subsidiary was a party to the Relevant Documents. (b) No payment or payments made by the Subsidiary, the Guarantor, any other guarantor or any other person or received or collected by any Beneficiary from the Subsidiary, the Guarantor, any other guarantor or any other person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder (except to the extent of such payment) until the Obligations are paid and performed in full. (c) If for any reason any Obligations to be performed or observed by the Subsidiary shall not be observed or performed, or if any amount payable by the Subsidiary referred to in Section 1(a) hereof shall not be paid when due and payable, the Guarantor shall promptly perform or observe or cause to be performed or observed each such Obligation or undertaking and shall forthwith pay such amount or perform such action at the place and to the person or entity entitled thereto pursuant to the Relevant Documents. 2. Amendments, etc., with respect to the Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Relevant Document and/or any collateral security document or other guaranty or document in connection therewith, may be amended, modified, supplemented or terminated, in whole or in part, as the parties thereto may deem advisable from time to time, and any collateral security, guaranty or right of offset at any time held by any Beneficiary for the payment or performance of the Obligations may be sold, exchanged, waived, surrendered or released. 3. Guarantee Absolute and Unconditional. The Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment and performance (and not merely of collection) without regard to (a) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Subsidiary against any Beneficiary, (b) the validity or enforceability of any Relevant Document against the Subsidiary, or (c) any other circumstances whatsoever (with or without notice to or knowledge of the Subsidiary or the Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of the Subsidiary for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance (other than a discharge of such Obligations through payment or performance). When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Subsidiary or any other person or entity or against any collateral security or guaranty for the Obligations or any right of offset with respect thereto, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Subsidiary or any such other person or entity or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of the Subsidiary or any such other person or entity or any such collateral security, guaranty or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Beneficiaries, and their respective successors, transferees and assigns, until all of the Obligations and the obligations of the Guarantor under this Agreement shall have been satisfied by payment and performance in full. The Guarantor further agrees to pay all expenses (including, without limitation, all reasonable fees and disbursements of counsel) that may be paid or incurred by the Beneficiaries in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guarantee. 4. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a trust company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) the Guarantor has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of the Guarantee and compliance by the Guarantor with all of the provisions thereof do not and will not contravene (i) any provision of any requirement of law or any order known to us of any court or governmental authority or agency applicable to or binding on the Guarantor, (ii) any contractual obligations of the Guarantor, or (iii) any of the provisions of its charter documents or By-laws; (e) no consent or authorization of, filing with or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person (including, without limitation, any stockholder or creditor of the Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; (f) the Guarantor is a bank with a combined capital and surplus or corporation with a tangible net worth of at least $250,000,000, as determined in accordance with generally accepted accounting principles; (g) the Guarantor owns all of the capital stock of the Subsidiary; and (h) there are no proceedings pending or, to our knowledge, threatened, and to our knowledge there is no existing basis for any such proceedings, against or affecting the Guarantor in or before any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, might restrict the Guarantor's corporate power and authority to perform its obligations under the Guarantee. 5. Reinstatement. The Guarantor agrees that this Guarantee shall be automatically reinstated with respect to any payment made prior to the termination of this Guarantee by or on behalf of the Subsidiary pursuant to any Relevant Document to which the Subsidiary is a party if and to the extent that such payment is rescinded or must be otherwise restored, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. 6. Miscellaneous. None of the terms or provisions of this Guarantee may be waived, amended or supplemented or otherwise modified except by a written instrument executed by the Guarantor and the Beneficiaries. This Guarantee shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Beneficiaries and their respective successors, transferees and assigns. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing or by telecopy and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail, three days after deposit in the postal system, first class postage pre-paid, or, in the case of telegraphic notice, when sent, answerback received, addressed to (a) in the case of the Guarantor, Two International Place, Boston MA 02110; Telecopy No. (617) 664-5371, and (b) in the case of any Beneficiary, the address provided for such party in the Relevant Documents, or at such other address as such person may provide to the Guarantor in writing. IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and the year first above written. STATE STREET BANK AND TRUST COMPANY By:_____________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I ---------- Federal Express Corporation, as Lessee BMO Leasing (U.S.), Inc., as Owner Participant First Security Bank, National Association, as Indenture Trustee and Pass Through Trustee SCHEDULE II ----------- 1. Participation Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") among the Subsidiary, Federal Express Corporation, as Lessee, BMO Leasing (U.S.), Inc., as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, and First Security Bank, National Association, as Indenture Trustee, Pass Through Trustee and Subordination Agent. 2. Trust Agreement (Federal Express Corporation Trust No. N590FE), dated as of May 1, 1998, as amended and restated as of June 15, 1998 between the Subsidiary and BMO Leasing (U.S.), Inc., as Owner Participant. 3. All other Operative Agreements as contemplated by the Participation Agreement to which the Subsidiary is or will be a party. OWNER TRUSTEE PARENT GUARANTEE OWNER TRUSTEE PARENT GUARANTEE, dated June 18, 1998, as amended and restated on July 7, 1998, by State Street Bank and Trust Company, a Massachusetts trust company (the "Guarantor") to and for the benefit of each person listed on Schedule I hereto (collectively, together with their permitted successors and assigns, the "Beneficiaries" and, individually, a "Beneficiary"). WITNESSETH: WHEREAS, State Street Bank and Trust Company of Connecticut, National Association, a wholly-owned subsidiary of the Guarantor (the "Subsidiary") wishes to act pursuant to the agreements listed on Schedule II hereto (as amended, modified or supplemented from time to time, the "Agreements"); WHEREAS, the Beneficiaries are willing to have the Subsidiary act under the Agreements provided that the Guarantor executes and delivers this Guarantee; WHEREAS, the Guarantor has determined that the execution and delivery by it of this Guarantee is necessary in order to conduct, promote and attain the business of the Subsidiary and the Guarantor; NOW, THEREFORE, the Guarantor hereby agrees with and for the benefit of the Beneficiaries as follows: 1. Guarantee. (a) The Guarantor hereby guarantees to the Beneficiaries the prompt and complete payment by the Subsidiary when due of, and the faithful performance of, and compliance with, all payment obligations of the Subsidiary under the Agreements and any other document relating thereto to which the Subsidiary is or may hereafter become a party or by which the Subsidiary is or may hereafter become bound (collectively, the "Relevant Documents"), in accordance with the terms thereof and the timely performance of all other obligations of the Subsidiary thereunder (such payment and other obligations, the "Obligations"). In no event, however, shall the agreement contained herein be construed to constitute a guarantee of any amount due (i) under any note or other similar instrument issued under the Relevant Documents or any other payment due under any Relevant Document that constitute non-recourse obligations of the Subsidiary, or (ii) with respect to acts or events occurring after such time, if any, that the Subsidiary ceases to be a party to the Relevant Documents. The agreement contained herein shall be enforceable against the Guarantor, notwithstanding the fact that the Subsidiary has ceased to be a party to the Relevant Documents, provided that the events or acts which give rise to such claim against the Guarantor occurred at such time as the Subsidiary was a party to the Relevant Documents. (b) No payment or payments made by the Subsidiary, the Guarantor, any other guarantor or any other person or received or collected by any Beneficiary from the Subsidiary, the Guarantor, any other guarantor or any other person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder (except to the extent of such payment) until the Obligations are paid and performed in full. (c) If for any reason any Obligations to be performed or observed by the Subsidiary shall not be observed or performed, or if any amount payable by the Subsidiary referred to in Section 1(a) hereof shall not be paid when due and payable, the Guarantor shall promptly perform or observe or cause to be performed or observed each such Obligation or undertaking and shall forthwith pay such amount or perform such action at the place and to the person or entity entitled thereto pursuant to the Relevant Documents. 2. Amendments, etc., with respect to the Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Relevant Document and/or any collateral security document or other guaranty or document in connection therewith, may be amended, modified, supplemented or terminated, in whole or in part, as the parties thereto may deem advisable from time to time, and any collateral security, guaranty or right of offset at any time held by any Beneficiary for the payment or performance of the Obligations may be sold, exchanged, waived, surrendered or released. 3. Guarantee Absolute and Unconditional. The Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment and performance (and not merely of collection) without regard to (a) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Subsidiary against any Beneficiary, (b) the validity or enforceability of any Relevant Document against the Subsidiary, or (c) any other circumstances whatsoever (with or without notice to or knowledge of the Subsidiary or the Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of the Subsidiary for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance (other than a discharge of such Obligations through payment or performance). When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Subsidiary or any other person or entity or against any collateral security or guaranty for the Obligations or any right of offset with respect thereto, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Subsidiary or any such other person or entity or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of the Subsidiary or any such other person or entity or any such collateral security, guaranty or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Beneficiaries, and their respective successors, transferees and assigns, until all of the Obligations and the obligations of the Guarantor under this Agreement shall have been satisfied by payment and performance in full. The Guarantor further agrees to pay all expenses (including, without limitation, all reasonable fees and disbursements of counsel) that may be paid or incurred by the Beneficiaries in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guarantee. 4. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a trust company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) the Guarantor has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of the Guarantee and compliance by the Guarantor with all of the provisions thereof do not and will not contravene (i) any provision of any requirement of law or any order known to us of any court or governmental authority or agency applicable to or binding on the Guarantor, (ii) any contractual obligations of the Guarantor, or (iii) any of the provisions of its charter documents or By-laws; (e) no consent or authorization of, filing with or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person (including, without limitation, any stockholder or creditor of the Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; (f) the Guarantor is a bank with a combined capital and surplus or corporation with a tangible net worth of at least $250,000,000, as determined in accordance with generally accepted accounting principles; (g) the Guarantor owns all of the capital stock of the Subsidiary; and (h) there are no proceedings pending or, to our knowledge, threatened, and to our knowledge there is no existing basis for any such proceedings, against or affecting the Guarantor in or before any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, might restrict the Guarantor's corporate power and authority to perform its obligations under the Guarantee. 5. Reinstatement. The Guarantor agrees that this Guarantee shall be automatically reinstated with respect to any payment made prior to the termination of this Guarantee by or on behalf of the Subsidiary pursuant to any Relevant Document to which the Subsidiary is a party if and to the extent that such payment is rescinded or must be otherwise restored, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. 6. Miscellaneous. None of the terms or provisions of this Guarantee may be waived, amended or supplemented or otherwise modified except by a written instrument executed by the Guarantor and the Beneficiaries. This Guarantee shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Beneficiaries and their respective successors, transferees and assigns. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing or by telecopy and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail, three days after deposit in the postal system, first class postage pre-paid, or, in the case of telegraphic notice, when sent, answerback received, addressed to (a) in the case of the Guarantor, Two International Place, Boston MA 02110; Telecopy No. (617) 664-5371, and (b) in the case of any Beneficiary, the address provided for such party in the Relevant Documents, or at such other address as such person may provide to the Guarantor in writing. IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and the year first above written. STATE STREET BANK AND TRUST COMPANY By:_____________________________________________ Name: Paul D. Allen Title: Vice President SCHEDULE I ---------- Federal Express Corporation, as Lessee PMCC Leasing Corporation, as Owner Participant First Security Bank, National Association, as Indenture Trustee and Pass Through Trustee SCHEDULE II ----------- 1. Participation Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 (the "Participation Agreement") among the Subsidiary, Federal Express Corporation, as Lessee, PMCC Leasing Corporation, as Owner Participant, Morgan Guaranty Trust Company of New York, as Original Loan Participant, and First Security Bank, National Association, as Indenture Trustee, Pass Through Trustee and Subordination Agent. 2. Trust Agreement (Federal Express Corporation Trust No. N675FE), dated as of June 1, 1998, as amended and restated as of June 15, 1998 between the Subsidiary and PMCC Leasing Corporation, as Owner Participant. 3. All other Operative Agreements as contemplated by the Participation Agreement to which the Subsidiary is or will be a party. -----END PRIVACY-ENHANCED MESSAGE-----